Annual report 2013 - SCA · menstruation and puberty and teaching children about the importance of...

SCA pArtiCipAteS with AN ALL-FeMALe teAM iN the VOLVO OCeAN rACe 2014–2015

Annual report 2013

Key figures

2013 20124) 2011

SEK EUR2) SEK EUR2) SEK EUR2)

Net sales, SEKm/EURm 89,019 10,295 85,408 9,815 81,337 9,013

Operating profit, SEKm/EURm 8,683 1,004 6,012 691 2,299 255

Operating profit, SEKm/EURm1) 9,934 1,149 8,646 994 7,738 858

Operating margin, % 10 7 3

Operating margin, %1) 11 10 10

Profit before tax, SEKm/EURm 7,683 888 4,748 546 974 108

Profit before tax, SEKm/EURm1) 8,934 1,033 7,382 849 6,413 711

Profit for the year, SEKm/EURm 5,564 643 5,000 575 607 68

Profit for the year, SEKm/EURm1) 6,392 739 7,257 834 5,678 629

Earnings per share, SEK 7:90 7:06 0:78

Earnings per share, SEK1) 9:08 10:27 8:00

Cash flow from current operations per share, SEK 8:53 10:35 7:55

Dividend per share, SEK 4:753) 4:50 4:20

Strategic capital expenditures, incl. acquisitions, SEKm/EURm –7,334 –848 –16,735 –1,923 –2,620 –290

Divestments, SEKm/EURm 1,716 199 17,682 2,032 –15 –2

Equity, SEKm/EURm 66,304 7,422 60,164 6,989 61,291 6,857

Return on capital employed, % 9 7 4

Return on capital employed, %1) 11 10 9

Return on equity, % 9 8 1

Return on equity, %1) 10 12 9

Debt/equity ratio 0.51 0.55 0.60

Debt/equity ratio, excluding pension liabilities 0.48 0.48 0.52

Average number of employees 34,004 33,775 43,6975)

Number of employees on December 31 33,535 35,701 43,3145)

1) Excluding items affecting comparability.2) See footnote 1) on pages 68 and 71 for exchange rates.3) Proposed dividend.4) In conjunction with the creation of a joint venture in Australia and New Zealand, the operations were deconsolidated from 2012.5) Of which packaging operations that were divested in June 2012: Average number of employees 12,015 and Number of employees on December 31 11,733.

Key figures

Contents Introductionthis is SCA .................................................................... flap

2013 at a glance ............................................................... 1

CeO’s message ................................................................ 2

A changing world ............................................................. 4

insight through dialog ..................................................... 6

Doing the right thing ........................................................ 7

SCA’s strategy .................................................................. 8

targets for people and nature .................................... 10

innovation and brands .................................................. 12

Sustainability creates profitable business .............. 14

Leadership and culture ................................................. 15

Value for our stakeholders ........................................... 16

the SCA share ................................................................ 18

information to shareholders ........................................ 21

B Board of Directors’ ReportB SCA GroupOperations and structure ............................................ 24

Acquisitions, investments and divestments ........... 25

Other Group information .............................................. 26

Sales and earnings ........................................................ 27

Operating cash flow ...................................................... 28

Financial position ........................................................... 29

B Business areaspersonal Care ................................................................. 30

tissue ............................................................................... 38

Forest products ............................................................. 44

B Responsibility and governanceCorporate Governance ................................................ 50

Board of Directors and Auditors ................................ 56

Corporate Senior Management team ...................... 58

risk and risk management .......................................... 60

B Financial statementsContents .......................................................................... 66

Consolidated income statement ............................... 67

Consolidated statement of comprehensive income ........................................... 67

Consolidated statement of changes in equity ........ 68

Consolidated operating cash flow statement ........ 68

Consolidated cash flow statement ............................ 69

Correlation between consolidated cash flow statement and operating cash flow statement ....... 70

Consolidated balance sheet ....................................... 71

Financial statements, parent Company ................... 72

Notes ................................................................................ 74

Adoption of the annual accounts ............................. 109

proposed disposition of earnings ........................... 110

Audit report ................................................................... 111

SCA DataMulti-year summary .................................................... 112

Comments to the multi-year summary ................... 113

Description of costs .................................................... 114

raw materials, energy and transport activities .... 114

production plants ........................................................ 115

Definitions and key ratios ........................................... 116

Glossary ......................................................................... 116

Addresses ..................................................................... 117

Awards and recognition ................................back cover

34,000 employees Sales of SEK 89bn SCA has sales in about 100 countries

Many strong brands

Group’s largest markets

SCA’s sales per region

North America, 11%

Latin America, 9%

Asia, 6%

Other countries, 1%

Europe, 73%

Profit before tax and dividend per share

Operating cash flow

Net sales and operating margin

GROUP

SCA is a leading global hygiene and forest products company that develops and produces sustainable personal care, tissue and forest products.

Personal CareThe business area comprises three product segments: incontinence products, baby diapers and feminine care.

0

Sales, SEKm

RussiaItalyNetherlandsMexicoSpainSwedenUSUKFranceGermany

0 3,000 6,000 9,000

Profit before tax Dividend

SEKm SEK

0

2,000

4,000

6,000

8,000

10,000

201320122011201020090

1

2

3

4

5

Profit excluding items affecting comparability. Reclassified for 2010 and 2011 due to the divestment of the European packaging operations on June 30, 2012.Dividend for 2013 relates to the proposed dividend.

SEKm

0

2,000

4,000

6,000

8,000

10,000

12,000

20132012201120102009

Reclassified for 2010 and 2011 due to the divestment of the European packaging operations on June 30, 2012.

Net sales Operating margin

SEKm %

0

20,000

40,000

60,000

80,000

100,000

120,000

201320122011201020090

2

4

6

8

10

12

Excluding items affecting comparability. Reclassified for 2010 and 2011 due to the divestment of the European packaging operations on June 30, 2012.

34,000 employees Sales of SEK 89bn SCA has sales in about 100 countries

Many strong brands

Net sales (share of Group)

Tissue, 53%

Forest Products, 17%

Total Group: SEK 89,019m

Personal Care, 30%

Operating profit (share of Group)

Tissue, 53%


Personal Care, 30%


Excluding items affecting comparability.

Operating cash flow (share of Group)

Tissue, 56%


Personal Care, 32%


Number of employees on December 31 (share of Group)

Tissue, 56 %


Personal Care, 32 %

Total Group: 33,535

Capital employed (share of Group)

Tissue, 51%


Personal Care, 11%


BUSINESS AREAS

SCA is a leading global hygiene and forest products company that develops and produces sustainable personal care, tissue and forest products.

TissueThe business area comprises two product segments: consumer tissue and Away-from-Home (AfH) tissue.

Page 38

Forest ProductsThe business area comprises five product segments: publication papers, kraftliner (packaging papers), pulp, solid-wood products and renewable energy.

4

•MajorityshareholderintheChinesetissuecompanyVindawith51.4%ownership.

•EstablishedoperationsinIndia.LaunchofLiberoandTempo.

•Efficiencyprogramsdeliveredaccordingtoplan.

•InauguratedfirstwindfarmaspartofjointlyownedcompanywithStatkraft.

•DivestedthepublicationpapermillinLaakirchen,Austria.

•NetsalesamountedtoSEK89,019m(85,408).

•Operatingprofit1)amountedtoSEK9,934m(8,646).

•Profitbeforetax1)totaledSEK8,934m(7,382).

•EarningspershareamountedtoSEK7.90(7.06).

•CashflowfromcurrentoperationsamountedtoSEK 5,989m(7,271).

•ProposeddividendofSEK4.75(4.50)pershare.

2013 at a glance

1) Excludingitemsaffectingcomparability.

SCA Annual Report 2013 1

2013 – a strong year for SCAIn2013,westrengthenedourpositionasaleadingglobalhygieneandforestproductscompanyanddisplayedastrongperformanceintermsofourstrategicpriorities:growth,innovationandefficiency.Webecamethemajorityshareholderin theChinesetissuecompanyVindaduringtheyear.Ourextensiveefficiencyprogramsdeliveredaccordingtoplanandwecanreflectbackonayearoffavorablesalesgrowthandimprovedprofitability.

Importance of growthThe world’s population is growing and aging. Combined with a higher standard of living, this is resulting in increased demand for hygiene prod-ucts, which is creating favorable growth oppor-tunities for SCA. SCA plans to continue on its current path of profitable growth in both mature and emerging markets, primarily through organic growth but also through acquisitions. Our long-term goal is to hold a leading position in each of our product segments in all markets in which we operate. Our sales growth in 2013 was good and, excluding exchange rate effects and divestments, amounted to 10%, of which organic growth accounted for 3%.

Mature markets offer the most significant growth opportunities in incontinence products as a result of their aging population and limited use of these products. I believe that we also have the potential to expand our product range by adding new products. Our new wash gloves and urinary tract infection tests (see page 32) are excellent and innovative examples of this.

We expect that most of our future growth will occur in emerging markets. During 2013, we made an offer for Vinda, China’s third largest tis-sue company, in which we already held a minor-ity share. We achieved a majority shareholding in the company, making China SCA’s most important emerging market. Our aim is to develop a collaboration with Vinda and utilize its extensive and strong distribution network.

During the year, we established operations in India, a market with a growing middle class where the consumption of hygiene products is currently low, which offers considerable future potential. We launched our Libero baby diapers and Tempo consumer tissue. We are investing in a production plant for hygiene products in Southwest India, where production is expected to commence in 2015.

Delivering savings according to planTo strengthen our competitiveness, we must continuously improve and enhance the effi-

ciency of our operations. In recent years, we have worked intensively to systemize our improvement efforts by developing work meth-ods and sharing best practice throughout the organization.

The three extensive efficiency programs under way in our hygiene and forest products operations delivered according to plan, enabling us to report savings of approximately SEK 2bn for the year.

Innovation and sustainability drive businessInnovative capacity based on customer and consumer insight is essential in the drive to cre-ate growth, competitiveness and profitability. Innovation is the key to creating customer and consumer value, which in turn strengthens cus-tomer loyalty and satisfaction. We are working to make the innovation process faster and launched a range of new innovations in 2013. One example is TENA Identifi, a system that makes it possible to analyze and customize incontinence solutions for nursing homes at an individual level (see page 32). Innovation and sustainability are tightly inter-linked insofar as they function as each other’s drivers. Sustainability is an integral part of our business model. Combined with our leading-edge expertise in sustainability and innovation, our financial strength leads many customers to choose us as a partner.

Open innovation – meaning cooperation with external parties – constitutes an important part of our innovation efforts and is a resource- efficient way of delivering increased customer and consumer value.

SCA is conducting numerous projects around the world designed, for example, to reduce water and energy consumption. New, resource-efficient solutions are resulting in a smaller environmental impact and lower costs. One example is the replacement of the oil-fired lime kiln in Munksund with a new kiln that uses biofuel, which enabled us to reduce our annual fossil carbon emissions by 75% and cut costs by SEK 50m.

SCA Annual Report 20132

Introduction | CEO’s message

We continuously receive confirmation that we are leading the way in the area. For the sixth consecutive year, we were named one of the world’s most ethical companies by the US Ethisphere Institute, as well as being included in the Dow Jones Sustainability Index and the Climate Disclosure Leadership Index.

Health and hygiene important for the individualWe improve hygiene standards worldwide with our hygiene solutions. We also aim to share our knowledge and teach people about the impor-tance of good hygiene. Some examples of such activities include educating young women about menstruation and puberty and teaching children about the importance of hand hygiene. In con-junction with the 2013 launch of our Libero baby diapers in India, we introduced a training initia-tive for doctors and midwives at some 30 hospi-tals and 500 baby health clinics.

Right culture breeds successCompared with only a few years ago, companies now encounter different expectations and requirements in such areas as business ethics, respect for human rights and supplier controls. This is why we decided to update our Code of Conduct during 2013, and we will use 2014 to train all of our employees in the updated Code.

The Code of Conduct is one of the corner-stones of our corporate culture, and having the right culture is entirely decisive for how success-ful we are in delivering on these expectations. Without a value-based, agile and result-oriented corporate culture, it doesn’t matter how much we restructure or how many cost-cutting pro-grams or new innovations we introduce. Our success depends on whether or not we have the right culture. This is why we continuously address leadership issues and provide develop-ment opportunities for our managers and employees. Our success in this area is meas-ured in our biennial Group-wide employee sur-vey. The survey for 2013 showed that we have a strong corporate culture and loyal employees.

Despite the sweeping changes and major reor-ganization that have taken place within the com-pany, our results surpassed the already high level achieved in the last survey.

The forest is a unique resource SCA is Europe’s largest private forest owner. The forest is a unique resource that offers us access to high-quality forest raw materials, which we then process into solid-wood prod-ucts, pulp, publication papers and kraftliner in our production process. In terms of pulp, we are approximately 30% self-sufficient. Forests also make a positive contribution to our environmen-tal initiatives, since they enable energy produc-tion from wind power and biofuels while at the same time storing and binding carbon dioxide. During the year, we inaugurated the first wind farm in the collaboration between SCA and the energy company Statkraft.

From a community perspective, forests also contribute to biodiversity while at the same time providing a source for nature experiences and recreation. Responsible forest management and replanting of trees may be one of the solutions to climate change. Our forests display a net growth rate and our growing forests absorb 2.6 million tons of carbon dioxide annually, which exceeds the emissions from SCA’s use of fossil fuels in production.

SCA brand strengthens businessSCA has many strong global and regional brands that help us communicate who we are and what we stand for. In addition to TENA for incontinence products and Tork for AfH tissue – our two leading global brands – we also have approximately 80 local and regional brands. We have been working for some time now to promote the SCA brand and create a clearer link to our customer and consumer brands and the company behind these products. In 2013, we intensified our brand focus and updated our logotype to better reflect SCA of today and tomorrow.

Our participation in the Volvo Ocean Race 2014–2015 with an all-female crew – Team SCA – forms part of our work to increase awareness of the SCA brand and our customer and consumer brands. The Volvo Ocean Race is a unique mar-keting platform. Our participation and our crew have already garnered attention and excitement throughout the world.

Our success will depend on how well we manage future opportunities and challenges. I look forward, with great confidence, to SCA’s business journey and our future ocean race.

Jan Johansson, President and CEO


CEO’s message | Introduction

A changing world

GROWING AND AGING POPULATIONThe world’s population is growing and aging. The current global popula-tion is seven billion and the UN predicts that this figure will grow to nine billion by 2050. The average life expectancy is increasing and the world’s elderly population is expected to grow more than any other section of the population. This growing population is resulting in an increased demand for hygiene products and thus creating favorable growth opportunities for SCA. The greatest population increase is expected to occur in Asia, Latin America and Africa, which means that having a presence in these markets and offering adapted products will be strategically important. An aging population will put more pressure on the elderly care system and an increasing number of elderly people will require home care. We are also becoming healthier and continuing to lead active lives at an older age. These factors are contributing to increased demand for customer and consumer-adapted incontinence solutions in both mature and emerging markets.

HIGHER STANDARD OF LIVINGAt the same time as the world’s population is growing, the level of poverty in the world is decreasing. An increasing number of people now earn more than USD 2 per day (the UN’s definition of poverty) or have moved into the middle class. Once people’s most basic needs for food and shelter are met, health and hygiene become top priorities. This creates favorable growth opportunities, and SCA is working to develop business models for consumers with limited resources.

HEALTH AND HYGIENEPoor or no access to hygiene and sanitation is one of the greatest global challenges to be resolved. Good hygiene and knowledge about hygiene and hygiene products improve people’s health and quality of life. SCA continuously develops new hygiene solutions and educates young women about menstruation and puberty, as well as teaching children about the importance of good hand hygiene. For many women in developing coun-tries, access to sanitary pads could mean the difference between going to school and work or being forced to stay home, while incontinence products enable elderly people to live a more active life.

A CHANGING WORLDGlobalization, urbanization, shifts in the balance of power, political decisions, the global economy, legislation and cultural dynamics all impact the world in which SCA operates. By trying to anticipate and assess structural changes in our external environment, we prepare for the future and ensure that we will be able to capital-ize on the benefits and tackle the chal-lenges that arise as a result of these changes.

Political decisions impact SCA. For example, decisions regarding healthcare and reimbursement systems affect the con ditions for SCA’s sales of incontinence products. SCA works to educate and pro-vide information about reimbursement systems in the countries in which its incontinence products are sold.

Economic power relationships are changing, and emerging markets such as China, India and Brazil are gaining an increasingly important influence.

Globalmacrotrends,frompopulationincreasesandhigherstandardsoflivingtoresourceshortagesandclimatechange,rapidlyaltertheconditionsforSCA’sbusinessoperations.Byanalyzingtheexternalenvironmentandtrends,andmaintainingclosecustomerandconsumerdialogs,SCAcanleveragethesedrivers,thusenablingthecreationoflong-termsustainablegrowth.


Introduction | A changing world

SCARCE RESOURCESAs a result of the growing global economy and world population, an increasing number of people are now sharing the planet’s natural resources. • Energy: Access to energy has become a

strategic issue in many countries. The Inter-national Energy Agency (IEA) predicts that the need for energy will increase by 40% by 2035, which will probably entail higher costs and, in some cases, an energy shortage. As a major energy consumer, this is an important issue for SCA and we continuously work to enhance energy efficiency. New technology is not only resource-efficient, but usually also generates fewer emissions and less waste.

SCA is also driving development in the area of renewable energy, including wind power and biofuel. SCA holds numerous riparian rights for hydropower operations that cannot be exploited under current legislation.

• Water: The UN predicts that two-thirds of the world’s population may live in areas with water shortages by 2025. Access to water is critical for people, industry and agriculture. SCA’s production operations are dependent on access to water and we are working to achieve our ambitious goals for efficient water usage.

• Forest management: Illegal felling and fell-ing of forests with a high conservation value

contributes to global deforestation and con-stitutes a threat to biodiversity. SCA has a Group target for checking the origin of all wood raw materials. Forests are a key com-ponent in our value chain and provide us with access to forest raw materials.

• Human capital: The economic progress of the world’s emerging markets and increas-ingly knowledge-extensive business in mature markets are resulting in an increased need for skilled labor and management. At SCA, we invest in the development and train-ing of our employees and take a strategic approach to meeting our future requirements for competent leaders.

CLIMATE CHANGESClimate change is one of the most critical environ mental and social issues facing the world today. Authorities are setting targets to reduce CO2 emissions, and the private sector is expected to play its part. SCA combats climate change by investing in new technology, effi-ciency enhancements, and biofuel and wind power initiatives. Our forests have an annual net growth of 1%. This means that our forests absorb 2.6 million net tons of CO2 annually, which exceeds the 1.8 million tons of emissions generated through the total use of fossil fuels in SCA’s production operations.

CHANGING CUSTOMER/CONSUMER BEHAVIORTrends, technological developments and prevailing values cause customer and consumer behavior to change over time. Accordingly, the ability to anticipate and exceed customer and consumer expecta-tions is becoming increasingly important.• Sustainable consumption: Limited

resources, political prioritizations and knowledgeable, aware customers and consumers are boosting demand for sustainable products and services.

• New technology: Many purchases are now made online, which is changing the rules of the game, for example, when it comes to marketing and distri-bution.

• The company behind the brand: More than ever before, customers and consumers are paying attention to the companies behind the products and services they buy and imposing greater demands on these companies in terms of corporate responsibility.

• Innovation: Highly innovative prod-ucts, services and business models are required to respond to these changing behaviors.


A changing world | Introduction

Insight through dialogSystematicstakeholderdialogsprovideSCAwithanunderstandingoftheneedsofitsstakeholders,theirexpectationsofSCAandwhetherornotSCAlivesuptotheseexpectations.Thesedialogsserveasthebasisforourinnovations,decisionsandpriorities.ReadmoreaboutSCA’sstakeholderdialogintheGroup’sSustainabilityReport.

CUSTOMER COMMENTS

“MercadonaandSCAhavearelationshipthatgoesfarbeyondtheclassiccustomer/supplierrelationship.Wearestrategicpartners,sowesharecommongoalsandworkasateamtoachievethem.ThisisafundamentalpartoftheMercadonamodel,andourwayofworking.Inordertobesuccessful,weneedtoensurethatweareworkingwiththebestsuppliersineachcategoryandSCAhasprovenitselftobeworthyformorethan30yearsthatwehavebeenworkingtogether.

OneofthemainqualitiesofSCAistheabilitytounderstandourneedslocallyanduseitsmultinationalstructuretomeetthem.Thisallowsforfastreactionstodailyoperationalissues,whileretainingaglobalapproachtostrategicissueswheretheexpertiseandbestpracticesofothermarketsarerequired.

SCA’ssustainabilityvaluesareessentialtothepartnershipwithMercadona.SCAistheonlysupplieroftissue,diapersandfemininecareforourleadingbrandsofBosqueVerdeandDeliplus,sothereputationofthesebrandsisinthehandsofcompaniessuchasSCA.Consumersandsocietywouldneveracceptustakingrisksintheareaofsustain-ability,andweareproudtoseehowSCAconsistentlydemonstratesthatitscommitmentisgenuineandbasedonfacts.”

Jorge Gisbert,PurchasingManager,Mercadona,Spain

“WeconsiderSCAtobeanimportantbusinesspartnerwhenitcomestoprovidingeffectiveandcost-efficientincontinencecare.SCA’sstrengthliesinitsbroadrangeofhigh-qualityproductsandfirst-rateservices,suchaseducationandtraining.WeappreciatethatSCAisatthecuttingedgeofthedevelop-mentofinnovativeproductsandservices.”

Andrea Segrini,Manager,MolinaNursingHome,Italy

“Wehavealong-standingrelationshipwithSCA,whichhasbeenoneofoursupplierssince2007.Long-termsupplierrela-tionshipsareimportanttoussincetheyenableustodevelopourbusinesstogetherwithoursuppliers.SCAisasupplierthatoffersagoodmixofquality,deliveryreliabilityandprice.”

Magnus Agervald, President,Byggmax,Sweden


Introduction | Insight through dialog

Doing the right thingSCAusesamaterialityanalysistodeterminetheareasthatareimportanttotheGroup’sstakeholders,andthisanalysisservesasthebasisforthecompany’sfuturepriorities.Theanalysis,whichwasmostrecentlyperformedin2013,isbasedonasurveyofapproximately1,500externalandinternalstakeholders.Theresultscorrespondedwellwithourprioritizedareas.

Earlier materiality analyses were conducted by SCA in 2008, 2010 and 2012. The results of the 2013 materiality analysis show that the follow-ing areas are considered most important by stakeholders:1. Innovation2. Customer and consumer satisfaction3. Business ethics4. Product safety5. Health and safety

Other key areas are brands, resource efficiency, forest assets, market positions and human rights. A total of about 1,500 customers, consum-ers, suppliers, investors, analysts, journalists, NGO representatives and SCA employees participated in the analysis. In the results of the survey, each stakeholder group was assigned the same weight, regardless of the number of votes in the group. Innovation was ranked highest in an overall assessment of all of the stakeholders’ results. Investors and analysts listed brands as the most important issue, while customers and consumers ranked customer and consumer satisfaction as most impor-tant. Both interest groups listed innovation as the second most important issue. SCA employees ranked customer and consumer satisfaction as the most important area, followed by innovation and business ethics.

4 Product safety was ranked number four by the

company’s stakeholders. Product safety is a high priority for SCA, particularly since many of the company’s products come into contact with people’s skin.

5 Health and safety was ranked number five in the

survey. Health and safety is a top priority for SCA and the all employee survey conducted in 2013 confirmed that employee awareness in the area has improved significantly. In 2013, the accident frequency rate fell 13%.

3 Business ethics are also considered highly import-

ant by the stakeholders. For SCA, this means competing fairly with zero tolerance for all forms of corrupt and unethical business practices. SCA expects its sup-pliers to adhere to the same rules as SCA, in accordance with our Supplier Standard.

2 Customer and consumer satisfaction received the

second highest ranking by the stake-holders. Through its comprehensive customer and consumer insight, SCA works to meet consumers’ needs and exceed their expectations. SCA con-ducts regular customer surveys and uses the opinions, ideas and any com-plaints from customers and consum-ers as a basis for improving its prod-ucts and services.

1 Innovation was ranked as the overall most important area by the Group’s stakeholders. Innovation is one of SCA’s three stra-

tegic priorities. Developing and differentiating products and services increases customer and consumer satisfaction, while at the same time strengthening the company’s market position and brands.


Doing the right thing | Introduction

SCA’s strategySCAisaleadingglobalhygieneandforestproductscompany.SCA’sstrategyisbasedonasustainablebusinessmodelwherevaluecreationforpeopleandnatureisputonaparwithgrowthandprofitabilitytoensureasuccessfulcompanyinboththeshortandlongterm.

SCA’s overall long-term objective is to generate increased value for shareholders.

MISSION TARGETS

“To sustainably develop, produce, market and sell increasingly value-added products and services within hygiene and forest products markets for customers and consumers.

Satisfying needs through understanding of customers and consumers, knowledge of local and regional market conditions and superior go-to-market approaches, com-bined with global experience, strong brands, efficient production and innovation.”

Return on capital employed

Excluding items affecting comparability.Reclassified for 2010 and 2011 due to the divestment of the European packaging operations on June 30, 2012.

%

8

9

10

11

12

20132012201120102009

Return on capital employedThe Group’s overall profitability target is to achieve a return on capital employed of 13% over a business cycle. The target is 30% for Personal Care, 15% for Tissue and to be in the top quartile of the industry for Forest Products.

GrowthSCA’s annual organic growth target for Personal Care is 5–7%, while the target for Tissue is 3–4%. For Forest Products, the target is to grow in line with the market.

Capital structureA debt/equity target of 0.70 over a business cycle and a debt payment capacity of more than 35%.

People targetsSCA’s people targets pertain to health and safety, the Group’s Code of Conduct, including human rights, sustainable innovations and hygiene solutions. For more information about targets and target fulfilment, refer to page 10.

Nature targetsSCA’s nature targets focus on climate, energy, water consump-tion, fiber sourcing and biodiversity. For more information about targets and target fulfilment, refer to page 11.


Introduction | SCA’s strategy

Growth

Increasing the hygiene business’s share of the SCA Group has been a strategic step toward reducing the company’s sensitivity to economic fluctuations and thereby ensuring a more long-term stable level of profitability and growth. While growth will mainly be organic, acquisitions will also be pursued. SCA aims to grow and strengthen its posi-tions in both mature and emerging markets by, for example, broadening its offering of product categories, product ranges and services, as well as growing in new segments and channels. SCA’s long-term goal is to be the leading company and strengthen its brand position in the markets that it serves.

Outcome 2013In 2013, SCA grew both organically and through acquisitions. SCA’s sales growth in 2013, excluding exchange rate effects and divestments, amounted to 10%. Acquisitions increased sales by 7%. Excluding exchange rate effects, SCA’s sales increase in emerg-ing markets amounted to 11%. Emerging markets accounted for 23% of SCA’s sales in 2013. The hygiene business’s share of Group sales increased to 83%.

In 2013, SCA became the majority share-holder in Vinda, with ownership of 51.4%. SCA will consolidate Vinda as of the first quarter of 2014. Vinda is the third largest tissue company in China, which is the world’s second largest tissue market.

During 2013, SCA established operations in India and decided to invest SEK 150m in the local production of hygiene products. The plan is to commence production at the Group’s own plant in 2015. India’s large pop-ulation and limited use of hygiene products has created potential for future growth. In 2013, SCA launched its Libero baby diapers and Tempo consumer tissue in India.

Russia is one of SCA’s most important emerging markets and SCA is investing in an increased tissue capacity in the country.

Innovation

Innovation is a driver for growth and profitability. A higher pace of innovation, based on SCA’s comprehensive customer and consumer insight, improves the Group’s competitiveness and strengthens and differentiates its customer offering. Through new and improved customer offerings, SCA strengthens its brands and creates additional customer and consumer value. Sustainability aspects and product safety are important for customers and consumers and thus also in the development of new products and services. SCA’s strategy is to increase the pace of innovation, capitalize on global econo-mies of scale and ensure that all segments have a competitive and balanced portfolio of innova-tions. Particular focus is given to exploring the possibilities of broadening the product portfolio, as well as expanding the range of services.

Outcome 2013SCA launched some 30 innovations during 2013.

One such innovation was TENA U-test. The test can be inserted into patients’ incontinence products to simply check whether they have a urinary tract infection. SCA also launched TENA Identifi, a new technology that simplifies the work carried out by caregivers and improves the qual-ity of life of those suffering from incontinence. Integrated electronic sensors in the incontinence product register information that can be used to provide the correct treatment and protection.

In response to the demand for intelligent hygiene solutions, which is being driven by an increased awareness about hygiene and the threat of pandemics, SCA launched Tork Intuition Sensor, a touch-free sensor-controlled foam soap dispenser. During 2013, SCA also intro-duced a portable Tork dispenser for wiping paper that can be used in restaurant kitchens, as well as Tempo Cotton Touch, a new handkerchief con-taining cotton to provide a stronger and softer product.

Efficiency

Enhanced capital efficiency, lower costs and strengthened cash flow are achieved through efficiency enhancement and savings meas-ures, as well as the optimization of capital employed in all parts of the Group. Establish-ing more efficient production and processes strengthens the Group’s competitiveness and enables SCA to improve its customer service and customer satisfaction. In most cases, this also results in positive environ-mental effects. Global functions in the hygiene operations relating to such areas as innovation and brand activities, as well as production, sourcing and logistics, generate cost synergies and enable efficient resource allocation. For the sake of efficiency, SCA chooses to work with partners in certain areas of the world.

Outcome 2013SCA is conducting three efficiency pro-grams, which were launched in 2012.

The cost and efficiency program under way in the hygiene operations progressed accord-ing to plan and will generate annual cost sav-ings of EUR 300m with full effect in 2015. The bulk of the savings relates to production and sourcing. In 2013, SCA achieved cost savings of SEK 1,050m.

In conjunction with the acquisition of Georgia-Pacific’s European tissue operations, synergies were identified that will lead to annual cost savings of EUR 125m with full effect in 2016. The Group’s efforts to realize cost synergies progressed as planned in 2013. The savings achieved pertained to production, sourcing, logistics, sales and administration. Cost savings of SEK 385m were achieved in 2013.

Forest Products’ efficiency program progressed as planned and will result in an annual earnings improvement of approxi-mately SEK 1.3bn with full effect in 2015. The program includes a structured plan to reduce fixed and variable costs, achieve improved income through increased production and efficiency enhancement, and implement a changed product and market mix. In 2013, the program generated an earnings improvement of SEK 550m.

SCAfocusesonthreestrategicprioritiesinordertoachieveitstargets:growth,innovationandefficiency.

STRATEGIC PRIORITIES


SCA’s strategy | Introduction

Targets for people and nature

PEOPLE TARGETS

Sustainableinnovations

Hygienesolutions

CodeofConduct

EmployeeHealth&Safety

TARGET

Wewilldeliverbetter,safeandenvironmentallysoundsolutionsto ourcustomers.Westrivetocontinuouslyimproveresourceefficiencyandenvironmentalper-formanceconsideringthewholelifecyclefornewinnovations.

OUTCOME 2013

Severalsustainableinnovationswerelaunched,suchasTENAIdentifi,TENAU-test,TorkIntuitionSensorandaportableTorkdispenser.

TARGET

Wewillmakeourknowledgeabouthygieneavailabletocustomersandconsumersandensureaccesstoaffordable,sustainablehygienesolutionstohelpthemleadahealthyanddignifiedlife.Inmar-ketsinwhichweoperatewewill:

•Provideinformationonhygienemattersaroundourproductsandservices.

•Strivetoimplementeducationprogramsforgirls,womenandcaregivers.

•Strivetoofferthebestvalueforconsumersmakinghygienesolu-tionsaffordabletoeveryone.

OUTCOME 2013

SCAholdsthenumberoneortwopositioninatleastonehygieneproductsegmentinabout90countries.

Hygienetrainingprogramswereconductedinallproductsegmentsonallcontinents.

Weofferedabroadportfolioofproductsrangingfromthepre-miumsegmenttotheeconomysegment.

TARGET

OurSCASupplierStandardwillbeusedtodrivesharedvaluesandprioritiesthroughoursupplychain.Wewilluseitinalloursupplychaincontractsby2015.

WewillmaintaincompliancewithourSCACodeofConduct.AllemployeeswillreceiveregulartrainingintheCode.

OUTCOME 2013

Atotalof75%(73)ofSCA’sglobalhygienesupplierbaseand60%(40)ofourforestproduct’ssupplierbasehadundertakentoadheretotheSCASupplierStandard.

91%(87)ofemployeeshavereceivedCodeofConducttraining.

TARGET

Ouraimiszeroworkplaceacci-dents,andwewilldecreaseouraccidentfrequencyrateby25%between2011and2016.

OHSAS18001willbeimple-mentedatallmainsitesby2016.

OUTCOME 2013

Theaccidentfrequencyratewas8.4(9.7)per1,000,000workinghours,representinga9%declinecomparedwiththereferenceyearof2011.

Bytheendof2013,45%(30)ofSCA’s67mainsiteswerecertifiedaccordingtoOHSAS18001.


Introduction | Targets for people and nature

NATURE TARGETS

Climate&energy

Fibresourcing&biodiversity

Water

TARGET

WewillreduceCO2emissionsfromfossilfuelsandfrompur-chasedelectricityandheatingby20%by2020,with2005asrefer-enceyear.

Wewilltripleourproductionofbiofuelsfromourforestsby2020,with2010asreferenceyear.

TheproductionofwindpoweronSCAforestlandwillincreaseto5 TWhby2020.

OUTCOME 2013

Atyear-end2013,CO2emissionsinrelationtotheproductionlevelhaddeclinedby11.8%,with2005asreferenceyear.

In2013,energyproductionfromSCA’sforest-basedbiofuelswas909GWh(870GWhintherefer-enceyear2010).

WindenergyfromSCAforestlandtotaled0.75TWh(0.4).

TARGET

Wewillachieveandmaintainourtargetofzerofreshfiber-basedmaterialfromcontroversialsources*,includingpulp.

Wewillpreservethebiodiversityofourforests.Aminimumof5%ofourproductiveforestlandwillbesetasidefromforestryinoureco-logicallandscapeplansandafurther5%willbesetasideaspartofourconsiderationfornatureinourmanagedforests.

OUTCOME 2013

AlldeliveriesofpulptoSCA’sfacili-tiesmettheGrouptarget.AllofSCA’swood-consumingunitsarereviewedbyindependentauditorsandmeettherequirementsoftheGrouptarget.

7%ofSCA’sproductiveforestlandwassetasideinthelongtermfromforestryinecologicallandscapeplans.In2013,15%oftheareainplannedharvestingsiteswassetasideforpreservation.

TARGET

Weaimtoachievewatersustaina-bilityandwewillreduceourwaterusageinwater-stressedregionsby10%by2015,with2010asrefer-enceyear.

AllSCApulpandpapermillswillemploymechanicalandbiologicalwatertreatmentplantsby2015.

OUTCOME 2013

Byyear-end2013,waterusageinwater-stressedregionsinrelationtotheproductionlevelhaddeclinedby10.4%,with2010asreferenceyear.

OftheGroup’s44pulpandpapermills,mechanicalandbiologicaleffluenttreatmentsystemshavebeeninstalledat42plants.

* Controversialsourcesaredefinedas:–Illegallyloggedtimber.–Timberfromforestswithahighconservationvalue.–Timberfromareaswherehumanrightsortraditionalrightsofindigenouspeoplearebeingviolated.


Targets for people and nature | Introduction

Innovation – a business driver

InnovationdrivesgrowthandprofitabilityandcomprisesoneofSCA’sthreestrategicpriorities.Developmentanddifferentiationofproductsandservicesboostcustomerandconsumervaluewhilestrengtheningthecompany’smarketpositionsandbrands.

SCA’s innovation process is deeply embedded in the Group’s strategy and business model. Innovation activities are based on market trends, customer and consumer insight, new technol-ogy and business models, with sustainability and product safety integrated into the process. SCA’s presence in both mature and emerging markets provides a good understanding of trends and customer and consumer needs. This is used to develop new business models, prod-ucts and services adapted to the prevailing con-ditions in these markets.

For SCA, innovation work involves increasing customer and consumer value by developing new, attractive products and services, evolving and improving existing offerings, and expanding the range. Innovation programs also encompass

production and work processes, with the aim of achieving a more efficient and resource-efficient operation.

Sustainability plays a central role in SCA’s innovation process. Sustainability-driven inno-vation may take the form of continuous optimi-zations, reducing resource utilization along the value chain, replacing fossil fuels with renewable alternatives or developing business models or offerings that enhance the quality of life of cus-tomers and consumers.

Innovation work is supported by SCA’s inno-vation teams across the globe and a well-devel-oped innovation culture. Open innovation – meaning cooperation with external parties – constitutes an important part of our innovation efforts and is a resource-efficient way of deliver-

ing increased customer and consumer value. SCA has an innovation portal for open innova-tion, the aim of which is to offer external parties the opportunity of working with SCA within cer-tain areas. Using this method, SCA establishes contact with parties that have access to technol-ogy and products that can help the Group strengthen its innovation efforts and, ultimately, the offering to its customers and consumers.

During the year, SCA filed applications for 50 patents. Patenting activities are pursued in a central organization that maintains a global focus and ensure appropriate protection for SCA innovations.

SCA launched some 30 innovations during 2013.


Introduction | Innovation and brands

The SCA brand communicates our identity and how we wish to be perceived: our values, our Code of Conduct, our comprehensive sustaina-bility work and our innovative way of thinking and developing new solutions based on cus-tomer and consumer insight. The brand also conveys how our products and services enable us to make a difference for people, nature and society. The core of the SCA brand is encapsu-lated in our brand concept Care of life.

SCA has undergone major changes in recent years and, as a result, our hygiene operations now account for 83% of our sales and we are increasingly being compared with other fast-moving consumer goods companies. To reflect this journey of change, SCA’s logotype was updated in early 2013. While the basic elements of the logotype are the same, the color and shape of the design have been changed and we now write out the words Care of life in order to clarify and strengthen the message.

Many consumers around the world use SCA products every day without making the connec-tion between SCA’s customer and consumer

brands and the SCA brand. Studies show that consumers now increasingly want to recognize and feel confident in the company behind the products they buy and know that the company is financially, environmentally and socially respon-sible. This is one of the reasons that we want to increase awareness of SCA and strengthen the connection between the company and its cus-tomer and consumer brands, thereby enabling us to capitalize on our shared strengths and val-ues, and create a clear link to our customers and consumers.

Our objective is to strengthen awareness of SCA and reinforce the connection to the com-pany’s customer and consumer brands and this is also the reason for SCA’s participation in the Volvo Ocean Race 2014–2015. We want more people to be aware of SCA’s products and the approximately 80 brands in SCA’s portfolio, including the global leaders TENA and Tork and strong regional brands such as Lotus, Libresse, Tempo, Libero, Saba and Nosotras.

The Volvo Ocean Race is a global project and a unique marketing platform offering an oppor-

tunity to introduce SCA’s operations and brands to various target groups across the world, including employees, customers, consumers and investors, in order to increase awareness of SCA and strengthen the perception of the Group as a leading global hygiene and forest products company.

A strong brand creates long-term valueSCAisworkingtoestablishastrongGroup-widebrandandstrengthenthelinktoourcustomerandconsumerbrands.A strongbrandcontributestotheperceptionofSCAasasolid,trustworthycompany,whichinturncreatescustomerandconsumerloyalty,drivessalesandprovidesabasisforafairvaluation.

SCA Care of life

Because our products make life easier for you and for millions of people around the world. Because our resources and the way we work are natural parts of the global lifecycle. And because we care.


Innovation and brands | Introduction

Sustainability creates profitable business

Competitive edgeEfficient sustainability work strengthens our customer relationships and offering since cus-tomers want to work with trusted suppliers with sound operational control. Economic value is also created through our ability to help custom-ers fulfill their own sustainability objectives. The crucial importance of sustainability for business was confirmed in a survey carried out on 400 SCA employees with customer relations. Just over 40% of these employees stated that sus-tainability activities had played a decisive role in the outcome of contract negotiations.

Cutting costsBy promoting and investing in resource effici-ency, we are able to reduce our environmental impact and costs. The goal of SCA’s ESAVE energy-efficiency program, which was intro-duced in 2003, is to reduce the Group’s energy consumption per ton by 14% by 2020, using 2010 as the reference year. A total of 147 projects were carried out in 2013, resulting in 1.7% reduc-tion in energy used per ton. Since 2010, SCA’s energy consumption has decreased by 3.1%.

Reducing risksSound operational control and counteracting corruption reduce the risks to which a company is exposed. All main SCA sites report their results in the ethical database Sedex and we encourage our suppliers to do the same. We review the conditions in our plants and investi-gate corruption risks. We apply a Global Supplier Standard and will use this standard in all supply chain contracts as of 2015.

SCA’S PEOPLE AND NATURE AMBITIONS

People ambitions• Webuildourpositionasoneofthemost

trusted companies in the world, delivering sustainable growth and value for our stake-holders.

• Weimprovehygienestandardsworldwidewith our hygiene solutions. For the millions of existing users of our products and ser-vices, and for the billions of people in emerging markets, we develop innovative solutions that make it easier to live healthy, sustainable lives.

• Wesupportwomen’sempowermentandtheir freedom to participate fully in society – socially, educationally and professionally – across the world by giving them access to and education about hygiene solutions.

Nature ambitions• Wedeliversustainablesolutionswith

added value for our customers based on safe, resource-efficient and environmen-tally sound sourcing, production, and research and development.

• Wecombatclimatechangeandminimizeour impact on the environment through a combination of new innovations and technologies, efficiency gains, consumer initiatives and carbon sequestering in our forests.

• Wecarefortheforestswithalloftheirbio-diversity and we are committed to manag-ing and utilizing them responsibly. We aim to maximize the benefits our forest have on our ecosystem, climate, customers and society, through a combination of innova-tion, efficiency gains and wise and long-term management.

About the Sustainability ReportSCA publishes a Sustainability Report each year. The Global Reporting Initiative (GRI) guidelines, level A+, are applied in the report and a detailed GRI index table can be viewed at www.sca.com. The Sustainability Report was reviewed in its entirety by PwC.

SCA’s Sustainability Report is available in English and Swedish in a printed version and at www.sca.com. The Sustainability Report is

also SCA’s Communication on Progress, a docu-ment required of all Global Compact signatories.

The Sustainability Report and the Annual Report should be viewed as a single unit in which informa-tion may be provided in either report or, where

appropriate, in both. Read more at www.sca.com or in SCA’s 2013 Sustainability Report.

SustainabilityisanintegralpartofSCA’sbusinessmodelandisofcriticalimportancetooursuccessandprofitability.Sustainabilityworkcontributestobusinessvalueinanumberofways.

Attracting investors and employeesSustainability issues are becoming increasingly important to many investors and 15% of SCA’s shareholders perform sustainability screening. Working in a sustainable company boosts employee pride. Ethics and values are key factors when it comes to recruiting top talent.

Strengthening the brandHigh-quality sustainability work can strengthen a brand’s identity and create long-term value. Sustainability is one of the cornerstones of the SCA brand and a crucial factor in many of SCA’s customer and consumer brands.


Introduction | Sustainability creates profitable business

LeadershipSCA needs leaders who inspire, challenge and motivate. SCA’s leaders should energize, embol-den and create the right conditions to allow all employees reach their full potential and help the company achieve its goals. The company’s lead-ers provide tools that enable each employee to assume responsibility for his or her own develop-ment and performance. All professional deve lop-ment at SCA has its starting point in the Group’s business goals, and harmonizes the individual’s ambitions with the Group’s expectations. Each individual is encouraged to develop the skills required for current and future positions.

During the year, work continued on SCA’s formal leadership development, resulting in a structured model for the entire Group, adapted to its specific circumstances.

SCA’s leadership platform, which defines the desired skills and behavior of its leaders, serves as the foundation for the company’s leadership program. Training is carried out on the basis of specific needs rather than general requirements. SCA takes a cross-border approach to learning and therefore uses a mix of participants from different countries, functions and organizational levels. During 2013, 200 new leaders completed the first stage of the leadership program.

CultureSCA’s corporate culture is characterized by exten-sive employee commitment and a focus on action and results. Having the right corporate culture is essential to SCA’s ability to effectively deliver on its strategy and strategic priorities. SCA’s leaders assume ownership for their areas of responsibility and expect the same from their teams – every day. This requires a sense of trust between managers and employees, and among co-workers, with open communication and individual responsibil-ity. To achieve a dynamic corporate culture in which teamwork drives innovation and employees motivate and complement one another, SCA endeavors to attract people with different experi-ences, personalities, perspectives and skills.

“Life Inspiring Careers”In order to communicate its corporate culture and highlight the professional development

Leadership and culture

OuremployeesareSCA’smostimportantasset.TheGroupdependsonmotivated,competentandhigh-performingemployeeswhoarewillingtothinkoutsidetheboxandcontributetothecompany’ssuccess.EmployeecompetenceandperformancearecriticaltoSCA’sabilitytomeetitsgoals.

opportunities available within the Group, SCA established “Life Inspiring Careers” in 2013 – a platform for marketing SCA as an attractive employer. During the year, SCA initiated partner-ships with selected universities and institutes of technology in such countries as the US, France, Spain, Germany, Russia and China as a means of establishing contact with potential future employees. The Group applies the same com-munication plan and conveys the same message in all countries, but adapts its initiatives accord-ing to the availability of individuals with the right skills and SCA’s needs in different markets.

Result-focused employee dialogIn 2011, SCA introduced its Global Performance Management System (GPS), the Group’s global tool for performance reviews. During each perfor-mance review, the employee’s established tar-gets, functional competence and, if the employee

is a manager, leadership qualities, are discussed and evaluated along with SCA’s values. As part of the review, the manager and employee also agree on a future development plan.

All employee surveyTo ensure its continuous development and improvement, SCA conducts an all employee survey every second year. This survey is used to provide an index for leadership, innovation, cus-tomer orientation and engagement, as well as an overall index. The most recent survey was con-ducted in 2013 and responses were received from 86.3% of the employees at the Group’s wholly owned companies. This year’s results surpassed the already high level achieved in the last survey. SCA’s leaders received positive assessments and we will continue to prioritize leadership since it is crucial for the company’s future success.


Leadership and culture | Introduction

Value for our stakeholdersByrespondingtonewtrendsandchangesinourexternalenvironmentandengaginginacontinuousstakeholderdialog,wecreatesustainablegrowthandprofitabilityandgeneratevalueforourstakeholders.

CUSTOMERS AND CONSUMERSTo create additional customer and consumer value, SCA focuses on developing new, attrac-tive products and services, evolving and improv-ing its existing offerings, and expanding its range. Through its comprehensive customer and consumer insight, SCA works to meet con-sumers’ needs and exceed their expectations. SCA has many different customers, from corpo-rate customers, including the retail trade, dis-tributors, printing houses, restaurants, schools, and medical and healthcare services, to con-sumers of SCA’s products.

SCA’s sustainability work also helps its cus-tomers achieve their own sustainability targets. By jointly working for greater efficiency and innovation, SCA and its customers can supply high-quality sustainable products that meet and exceed consumer needs and expectations.

SCA also works to provide information about hygiene and its hygiene products and solutions. In emerging markets, SCA sells hygiene prod-ucts and solutions that are specially adapted to consumers with limited resources.

Outcome 2013: SCA holds the number one or two position in at least one hygiene product seg-ment in about 90 countries. SCA offered a broad portfolio of products ranging from the premium segment to the economy segment. SCA contin-ued to educate young women about menstrua-tion and puberty, as well as educating children about the importance of hand hygiene and pro-viding training for nurses in the field of inconti-nence care. Our products were distributed to both major corporate customers and small local stores.

Suppliers

Share- holders

Employees

Customers and

consumersSociety

SHAREHOLDERSSCA’s overall long-term objective is to generate increased value for its shareholders. This is achieved through a positive share price trend and dividends.

SCA aims to provide long-term stable and increasing dividends to its shareholders. Over a business cycle, approximately one-third of cash flow from current operations (after interest expenses and tax) is normally allocated for dividends.

Outcome 2013: SCA’s share price rose 40% in 2013. The Board of Directors proposes that the dividend be raised by 5.6% to SEK 4.75 (4.50) per share. Accordingly, dividend growth over the most recent five-year period amounted to 6.3%.

The proportion of shareholders that only invest in ethical and sustainable companies is on the rise and 15% of SCA’s shareholders perform sustainability screening. SCA is included in numer-ous sustainability indices, including the Dow Jones Sustainability Indices, which are among the world’s most prestigious sustainability indices, and the FTSE4Good index series.

Income tax paid, 2% (SEK 1, 634m)

Dividend to shareholders, 4% (SEK 3,202m)

Employee social security costs, 4% (SEK 3,803m)

Remaining in the company, 11%2) (SEK 10,169m)

Employee salaries, 15% (SEK 12,807m)

Suppliers, 63%3) (SEK 56,404m)

Interest paid to creditors, 1% (SEK 1,000m)


Introduction | Value for our stakeholders

SUPPLIERSSCA strives to have transparent, long-term relationships with its suppliers to guarantee both high quality and financial stability for both parties. Purchasing accounts for SCA’s single largest expense. To achieve economies of scale, most input goods, such as pulp, elec-tricity and chemicals, are purchased centrally. Forest raw materials are often purchased locally, which provides a substantial financial contribution to local suppliers and the local economy. Another way of building value is to develop the suppliers’ expertise through train-ing and cooperation. SCA’s goals in the area of responsible sourcing encompass all suppliers of raw materials and input goods. SCA’s Global Supplier Standard serves as a basis for ensur-ing that the company’s suppliers meet the highest standards in terms of social and envi-ronmental responsibility and product safety.

Outcome 2013: SCA paid SEK 56.4bn to its suppliers during 2013.

SCA continued its efforts to enhance the efficiency and coordinate control of the supply chain by centralizing the purchasing of global commodities. A total of 75% of SCA’s hygiene supplier base and 60% of its forest products supplier base have undertaken to adhere to the SCA Supplier Standard and its requirements with regard to social responsibility, product safety and the environment.

SOCIETYSCA contributes to the local economy as a major employer in many regions and through its community involvement. Aside from income tax, SCA also pays property taxes, payroll taxes, pension taxes, customs duties and energy taxes.

SCA’s aim is to strengthen its relationships with the communities in which it operates, and to make a difference in people’s lives. In accord ance with SCA’s guidelines for commu-nity involvement, we prioritize initiatives with a clear link to SCA’s operations, geographic presence, expertise and core values of respect, responsibility and excellence. This means that many of our efforts pertain to hygiene, health and the environment, and are often directed at women and children. SCA’s initiatives include both large-scale investments and small projects with a local focus. These projects cover everything from education and donations to disaster relief and tree planting. Many employees and customers are interested in SCA’s community involvement, and our initi-atives thus provide us with competitive advan-tages in these areas.

Outcome 2013: SCA paid SEK 1.6bn in income tax in 2013.

SCA invested approximately SEK 34m in 370 local community involvement projects during the year, including monetary donations to Médecins Sans Frontières (MSF) and donations of hygiene products when Typhoon Haiyan hit the Philippines.

EMPLOYEESOur employees are SCA’s most important asset. The Group depends on motivated, com-petent and high-performing employees who are willing to think outside the box and contrib-ute to the company’s success. Employee com-petence and performance are critical to SCA’s ability to successfully pursue its strategy, meet its goals and continue to develop. SCA’s lead-ers should energize, embolden and create the right conditions to allow all employees reach their full potential. We create value for our employees by offering professional develop-ment opportunities and a stimulating, safe and healthy work environment. SCA offers employ-ment terms and benefits that are in line with prevailing market terms.

Outcome 2013: During 2013, SCA paid approximately SEK 12.8bn in salary to its employees.

To ensure its continuous development and improvement, SCA conducts an all employee survey every second year. This survey is used to provide an index for leadership, innovation, customer orientation and engagement, as well as an overall index. The most recent sur-vey was conducted in 2013 and responses were received from 86.3% of the employees at the Group’s wholly owned companies. This year’s results surpassed the already high level achieved in the last survey. SCA’s leaders received positive assessments and we will continue to prioritize leadership since it is cru-cial for the company’s future success. Health and safety is a top priority for SCA and the survey confirmed that employee awareness in the area has improved significantly. In 2013, the accident frequency rate fell 13%.

1) BasedonSCAnetsales2013.2) Currentexpenditures,restructuringcosts,strategiccapitalexpendituresandacquisitions.3) Rawmaterials,transportationanddistribution,energyandotherexpensesforgoodssold.

Income tax paid, 2% (SEK 1, 634m)

Dividend to shareholders, 4% (SEK 3,202m)

Employee social security costs, 4% (SEK 3,803m)

Remaining in the company, 11%2) (SEK 10,169m)

Employee salaries, 15% (SEK 12,807m)

Suppliers, 63%3) (SEK 56,404m)

Interest paid to creditors, 1% (SEK 1,000m)

Economic value distributed by stakeholder group 20131)


Value for our stakeholders | Introduction

The SCA shareSCAsharesarequotedandtradedonNASDAQOMXStockholm,andasAmericanDepositoryReceipts(ADRlevel1)in theUSthroughDeutscheBank.Thefinal2013closingpriceonNASDAQOMXStockholmforSCA’sBsharewasSEK198.00(141.00),correspondingtoamarketcapitalizationofSEK140bn(99)atDecember31,2013.In2013,thesharepricerose40%,whiletheOMXStockholm30Indexrose18%duringthesameperiod.ThehighestclosingpriceforSCA’sBshareduringtheyearwasSEK 198.00,whichwasnotedonDecember30.ThelowestpricewasSEK140.00onJanuary7.TheproposeddividendisSEK 4.75(4.50)pershare.Formoreinformation,refertothesection“Dividendanddividendpolicy”onpage20.

IndexOn NASDAQ OMX Stockholm, SCA is included in the OMX Stockholm 30 Index and in the Per-sonal & Household Goods sector within Con-sumer Goods. In addition to indexes directly linked to NASDAQ OMX Stockholm, SCA is included in other indexes, such as the FTSE Eurofirst 300 Index. Within MSCI, SCA is included in Household Products within Con-sumer Staples. SCA is also represented in sustainability indexes, including FTSE4Good,

OMX GES Sustainability Sweden PI, OMX GES Sustainability Nordic PI and the Dow Jones Sustainability Index.

LiquidityIn 2013, the volume of SCA shares traded on NASDAQ OMX Stockholm was 462 million (550), representing a value of approximately SEK 77bn (64). Average daily trading for SCA on NASDAQ OMX Stockholm amounted to 1.8 million shares, corresponding to a value of SEK 307m (256).

Trading on BATS Chi-X Europe, Turquoise and Burgundy amounted to approximately 290 mil-lion SCA shares during the year.

OwnershipSome 37% (42) of the share capital is owned by investors registered in Sweden and 63% (58) by foreign investors. The US and the UK account for the highest percentage of shareholders registered outside Sweden.

Total shareholder return 2013

Total shareholder return 2011–2013

Total shareholder return 2009–2013

SCA’s ten largest shareholdersAccording to SIS Ägarservice at December 31, 2013, the following companies, foundations and mutual funds were the ten largest registered shareholders based on voting rights:

Shareholders No. of A shares No. of B shares Votes (%) Holding (%)

IndustrivärdenAB 40,500,000 30,406,049 29.2 10.1

Handelsbanken* 20,164,699 10,650,355 14.2 4.4

NorgesBankInvestmentManagement 8,064,980 37,838,220 8.0 6.5

Skandia 2,336,684 460,621 1.6 0.4

SwedbankRoburFunds 15,121,895 1.0 2.1

SEBFunds&SEBTryggLifeInsurance 625,100 6,211,129 0.8 1.0

StandardLifeInvestmentFunds 10,288,901 0.7 1.5

SCAEmployeeFoundation 982,845 74,406 0.7 0.1

FidelityFunds 9,436,591 0.6 1.3

AMF–InsuranceandFunds 8,847,000 0.6 1.3*Includingmutualfundsandfoundations. Source:SISÄgarservice

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Competitor index total shareholder return1)

1) Weightedindexofcompetitors’totalshareholderreturn.CompetitorsareselectedtoreflectSCA’soperations.TheindexisusedwhencomparingtheSCAshareperformanceoverathree-yeartermfor the long-termportion(LTI)ofseniorexecutive’svariableremuneration.


Introduction | The SCA share

Percentage of foreign ownership, capital

Outside Sweden, 63%

Sweden, 37%

Data per share

Allearningsfiguresincludeitemsaffectingcomparabilityunlessotherwiseindicated.SEK per share unless otherwise indicated 2013 2012 2011 2010 2009

Earningspershareafterfulltax:

Afterdilution 7.90 7.06 0.78 7.90 6.78

Afterdilution,excludingitemsaffectingcomparability7) 9.08 10.27 8.00 8.65 8.32

Beforedilution 7.90 7.06 0.78 7.90 6.78

MarketpriceforBshare:

Averagepriceduringtheyear 168.27 116.77 95.80 100.20 83.18

Closingprice,December31 198.00 141.00 102.00 106.20 95.45

Cashflowfromcurrentoperations1)7) 8.53 10.35 7.55 9.24 16.36

Dividend 4.752) 4.50 4.20 4.00 3.70

Dividendgrowth,%3) 6 0 1 2 1

Dividendyield,% 2.4 3.2 4.1 3.8 3.9

P/Eratio4) 25 20 N/A 13 14

P/Eratio,excludingitemsaffectingcomparability4)7) 22 14 13 12 11

Price/EBIT5)7) 20 22 47 14 13

Price/EBIT,excludingitemsaffectingcomparability5)7) 18 15 14 13 11

Betacoefficient6) 0.62 0.86 0.83 0.82 0.78

Pay-outratio(beforedilution),% 60 64 N/A 51 55

Equity,afterdilution 94 85 87 96 96

Equity,beforedilution 94 85 87 96 96

NumberofregisteredsharesDecember31(millions) 705.1 705.1 705.1 705.1 705.1

ofwhichtreasuryshares(millions) 2.8 2.8 2.8 2.8 2.81)Seedefinitionsofkeyratiosonpage116.2)Boardproposal.3)Rollingfive-yeardata.4)Sharepriceatyear-enddividedbyearningspershareafterfulltax

anddilution.

5)Marketcapitalizationplusnetdebtplusnon-controllinginterestsdividedbyoperatingprofit.(EBIT=earningsbeforeinterestandtaxes).

6)Sharepricevolatilitycomparedwiththeentirestockexchange(measuredforrolling48months).

7)Reclassifiedfor2010and2011duetothedivestmentoftheEuropeanpackagingoperationsonJune30,2012.

Ticker names

NASDAQOMXStockholm SCAA,SCAB

NewYork(ADRlevel1) SVCBY

Shareholder structure

HoldingNo. of

shareholders No. of shares Holding (%) Votes (%)

1–500 45,997 8,132,407 1.2 1.2

501–1,000 11,317 8,589,153 1.2 1.3

1,001–5,000 12,576 27,145,907 3.9 4.3

5,001–10,000 1,629 11,592,240 1.6 1.8

10,001–20,000 717 10,248,497 1.4 1.3

20,001– 1,081 639,401,890 90.7 90.1

Total 73,317 705,110,094 100.0 100.0Source:Euroclear

Share distribution

December 31, 2013 Series A Series B Total

Numberofregisteredshares 87,417,535 617,692,559 705,110,094

ofwhichtreasuryshares 2,767,605 2,767,605

Share issues, etc. 1993–2013

Since the beginning of 1993, the share capital and the number of shares have increased due to issues of new shares, conversions and splits, as detailed below:

No. of sharesIncrease in share

capital, SEKmCash payment,

SEKm Series A Series B Total

1993ConversionofdebenturesandnewsubscriptionthroughSeries1warrants 4,030,286 40.3 119.1

Newshareissue1:10,issuepriceSEK80 17,633,412 176.3 1,410.7 62,145,880 131,821,657 193,967,537

1994 Conversionofdebentures 16,285 0.2 – 62,145,880 131,837,942 193,983,822

1995 Conversionofdebentures 3,416,113 34.2 – 62,145,880 135,254,055 197,399,935

1999 Newshareissue1:6,issuepriceSEK140 32,899,989 329.0 4,579.0 62,133,909 168,166,015 230,299,924

2000 Conversionofdebentures 101,631 1.0 15.0 61,626,133 168,775,422 230,401,555

2001 Newshareissue,privateplacement 1,800,000 18.0 18.0 45,787,127 186,414,428 232,201,555

2002 NewshareissuethroughIIBwarrants 513 0 0.1 41,701,362 190,500,706 232,202,068

2003 ConversionofdebenturesandsubscriptionsthroughIIBwarrants 2,825,475 28.3 722.9 40,437,203 194,590,340 235,027,543

2004 Conversionofdebentures 9,155 0.1 1.1 40,427,857 194,608,841 235,036,698

2007 Split3:1 470,073,396 – – 112,905,207 592,204,887 705,110,094


The SCA share | Introduction

The SCA share, cont.

Dividend and dividend policySCA aims to provide long-term stable and rising dividends to its shareholders. Over a business cycle, approximately one-third of cash flow from current operations (after interest expenses and tax) is normally allocated to dividends. If, in the long term, cash flow from current operations exceeds what the company can place in profit-able expansion investments, the surplus shall be used to amortize loans or is returned to share-holders through higher dividends or share repur-chases. The Board of Directors proposes that the dividend be raised by 5.6% to SEK 4.75 (4.50) per share for the 2013 fiscal year. Accord-ingly, dividend growth over the most recent five-

year period amounted to 6.3%. The 2013 divi-dend represents a dividend yield of 2.4%, based on SCA’s share price at the end of the year.

Incentive programSCA’s incentive program is designed to con-tribute to the creation of shareholder value. The program for senior executives consists of two components, one of which is tied to the total shareholder return on the SCA share compared with an index consisting of SCA’s largest global competitors. For more information about the structure of the program, see Note 6 (Personnel and Board costs), on pages 85–86.

SEK

0

1

2

3

4

5

20132012201120102009

Average cumulative growth: 6.3%

Dividend per share


Introduction | The SCA share

Information to shareholdersAnnual General Meeting

The Annual General Meeting of Svenska Cellu-losa Aktiebolaget SCA will be held on Thursday, April 10, 2014 at 3:00 p.m. at the Stockholm Waterfront Congress Centre, Nils Ericsons Plan 4, Stockholm, Sweden. Registration for the Annual General Meeting will start at 1:30 p.m.

Notification of attendanceShareholders who wish to attend the Annual General Meeting must:• belistedintheshareholders’registermain-

tained by Euroclear Sweden AB on Friday, April 4, 2014, and

• givenoticeoftheirintentiontoattendthemeeting no later than Friday, April 4, 2014.

Notification may be given in any of the following manners:• bytelephoneat+4684029059,weekdays

between 8:00 a.m. and 5.00 p.m.• ontheInternetatwww.sca.com• bymailtoSvenskaCellulosaAktiebolaget

SCA, Corporate Legal Affairs, P.O. Box 200, SE-101 23 Stockholm, Sweden

In order to attend the meeting, shareholders with custodian registered shares must have such shares registered in their own names. Tempo-rary registration of ownership, so-called voting rights registration, should be requested from the bank or fund manager managing the shares well in advance of Friday, April 4, 2014.

Name, personal identity number/corporate registration number, address and telephone number, and number of accompanying persons, if any, should be stated when notification is given. Shareholders represented by proxy should deliver a proxy in the original to the com-pany prior to the Annual General Meeting. Proxy forms are available upon request and on the company website www.sca.com. Anyone repre-senting a corporate entity must present a copy of the registration certificate, not older than one year, or equivalent authorization document, listing the authorized signatories.

The Notice convening the Annual General Meeting can be found on the company website www.sca.com.

Dividend

The Board of Directors proposes a divi-dend of SEK 4.75 per share and that the record date for the dividend be Tuesday, April 15, 2014. Payment through Euro-clear Sweden AB is expected to be made on Tuesday, April 22, 2014.

Nomination Committee

• Carl-OlofBy,ABIndustrivärden,Chairman of the Nomination Committee

• HåkanSandberg,HandelsbankensPensionsstiftelse and others

• YngveSlyngstad,NorgesBank Investment Management

• CarolineafUgglas,Skandia• SverkerMartin-Löf,Chairman

of the Board of SCA

The Nomination Committee prepares, among other things, proposal for election of Board members.

Financial information 2014–2015

Interim report (Jan 1–Mar 31, 2014) April 29, 2014

Interim report (Jan 1–Jun 30, 2014) July 18, 2014

Interim report (Jan 1–Sep 30, 2014) October 29, 2014

Year-end report for 2014 January 30, 2015

Annual Report for 2014 March 2015

Annual Reports, year-end reports and interim reports are published in Swedish and English (in the event of differences between the English translation and the Swedish original, the Swedish text shall prevail) and can be downloaded from SCA’s website www.sca.com. Annual Reports can also be ordered from:Svenska Cellulosa Aktiebolaget SCACorporate CommunicationsBox 200SE-101 23 Stockholm, SwedenTel +46 8 788 51 00

Subscriptions to publications: Subscription to SCA’s press releases, interim reports and year-end reports can be arranged by registering an e-mail address on the SCA website.


Information to shareholders | Introduction

GroupOperations and structure .................................... 24

Acquisitions, investments and divestments ... 25

Other Group information ...................................... 26

Sales and earnings ................................................ 27

Operating cash flow .............................................. 28

Financial position ................................................... 29

Business areasPersonal Care ......................................................... 30

Tissue ....................................................................... 38

Forest Products ..................................................... 44

Responsibility and governanceCorporate Governance ........................................ 50

Board of Directors and Auditors ........................ 56

Corporate Senior Management Team .............. 58

Risk and risk management .................................. 60

Financial statementsContents .................................................................. 66

Consolidated income statement ....................... 67

Consolidated statement of comprehensive income ................................... 67

Consolidated statement of changes in equity .............................................. 68

Consolidated operating cash flow statement .............................................. 68

Consolidated cash flow statement .................... 69

Correlation between consolidated cash flow statement and operating cash flow statement .............................................. 70

Consolidated balance sheet ............................... 71

Financial statements, Parent Company ........... 72

Notes ........................................................................ 74

Adoption of the annual accounts ..................... 109

Proposed disposition of earnings ................... 110

Audit report ............................................................ 111

Board of Directors’ Report


Board of Directors’ Report

Operations and structureSCA is a leading global hygiene and forest products company that develops and produces sustainable personal care products, tissue and forest products.

SCA divides and reports its operations accord-ing to three business areas – Personal Care, Tissue and Forest Products. Personal Care con-sists of three product segments: incontinence products, baby diapers and feminine care. Tissue includes consumer tissue and Away-from-Home (AfH) tissue, and Forest Products comprises publication papers, kraftliner (pack-aging papers), pulp, solid-wood products and renew able energy.

While Europe is SCA’s largest market, the Group also holds strong positions in North America, Latin America and Asia Pacific. Expan-sion takes place through both organic growth and acquisitions, primarily within Personal Care and Tissue.

SCA is Europe’s largest private forest owner, with 2.6 million hectares of forest land, which covers approximately half of the Group’s timber supply and enables efficient raw material integration and effective cost control.

Organization SCA has seven business units: • SCAAfHProfessionalHygieneEurope,

which offers AfH tissue.• SCAConsumerGoodsEurope,whichoffers

consumer products.• SCAIncontinenceCareEurope,whichoffers

incontinence products. • SCAAsiaPacific,whichofferstissueand

personal care products.

• SCAAmericas,whichofferstissueandper-sonal care products.

• SCAMEIA(MiddleEast,IndiaandAfrica),which offers tissue and personal care products.

• SCAForestProducts,whichofferspublica-tion papers, kraftliner (packaging papers), pulp, solid-wood products and renewable energy.

Inadditiontoitsbusinessunits,SCAhasestab-lished two global units: • GlobalHygieneCategory(GHC),withglobal

responsibility for customer and consumer brands and innovation in the hygiene area.

• GlobalHygieneSupply(GHS),withglobalresponsibility for purchasing, production planning, technology and investments in the hygiene business.

The organization has six group functions: Finance, Human Resources, Sustainability, Legal Affairs, Communications, and Strategy and Business Development. Strategy and Busi-ness Development is also responsible for the Group’sGlobalBusinessServices(GBS)andITServices. GBS has global responsibility for pro-viding transactional services, human resources support, office-related services and other ser-vices for all units in SCA.

Significant events during the year In2013,SCAdecidedtomakeapubliccashoffer for the Chinese tissue company Vinda. SCA became part owner of Vinda in 2007 and owned 21.7% of the company prior to this offer. The acquisition was completed in 2013 and SCA is now the majority shareholder in Vinda with a 51.4% ownership. Vinda is the third largest tissue company in China, which is the world’s second largest tissue market.

In2013,SCAdecidedtoinvestapproximatelySEK 150m in the local production of hygiene productsinIndia.Theplanistocommencepro-ductionatSCA’splantin2015.In2013,SCAlaunched its Libero baby diapers and Tempo consumertissueinIndia.

The first wind farm in the collaboration between SCA and Statkraft was inaugurated during the year. During its first phase, the wind farm will have an annual output of 200 GWh.

SCA completed the divestment of its publi-cation paper mill in Laakirchen, Austria during the year.

InconjunctionwithSCA’sacquisitionofGeorgia-Pacific’s European tissue operations in 2012, the European Commission demanded that certain divestments be made in the consumer tissue segment. These divestments were carried out by SCA and approved by the European Commission in 2013.

In2013,SCAacquiredtheremainingminorityshares in its German subsidiary Hygiene Prod-ucts SE, formerly PWA, through a compulsory redemption.

OrganizationPresident and CEO

Group Functions: Finance, Human Resources, Sustainability, Legal Affairs, Communications, and Strategy and Business Development*

SCA Americas

SCA MEIA

SCA AfH Professional Hygiene Europe

SCA Consumer Goods

Europe

SCA Asia Pacific

SCA Forest Products

SCA IncontinenceCare

Europe

Global Hygiene Supply (GHS)

Global Hygiene Category (GHC) Global responsibility across in the hygiene operations

Global responsibility across in the hygiene operations

Vice PresidentVice President and CFO

* The Strategy and Business Development corporate staff function is also responsible for Global Business Services (GBS) and IT Services. GBS has global responsibility for providing transactional services, human resources support, office-related services and other services for all units in SCA.

Board of Directors’ ReportSCA Annual Report 201324

SCA Group | Operations and structure

Acquisitions, investments and divestments Majority shareholder in Chinese tissue company Vinda In2013,SCAdecidedtomakeapubliccashoffer for the Chinese tissue company Vinda. SCA became part owner of Vinda in 2007 and owned 21.7% of the company prior to this offer. The acquisition was completed in 2013 and SCA is now the majority shareholder in Vinda with a 51.4% ownership. Vinda is the third largest tissue company in China, which is the world’s second largest tissue market.

Investments in India In2013,SCAdecidedtoinvestapproximatelySEK 150m in the local production of hygiene productsinIndia.Theplanistocommencepro-duction at SCA’s plant in 2015. SCA launched its Libero baby diapers and Tempo consumer tissue in 2013.

Acquisition of minority shares in European subsidiary In2013,SCAacquiredtheremainingminorityshares in its German subsidiary Hygiene Prod-ucts SE, formerly PWA, through a compulsory redemption. The purchase price for the shares was approximately SEK 1bn. The final purchase price will be determined by a German court.

Investments in Personal Care In2013,SCAdecidedtoinvestapproximatelySEK 300m in a major product upgrade of its open diapers in Europe. The project is expected to be completed in 2015.

During the year, SCA decided to invest about SEK 170m in a new machine line for the produc-tion of incontinence products in Olawa, Poland. Commissioning is scheduled for 2014.

Investments in Tissue In2013,SCAcontinuedtoinvestinincreasedcapacity in Tissue in Russia and Germany, including an investment of approximately SEK 1.2bn in a new tissue machine in Sovetsk, Rus-sia, and an investment of about SEK 1.1bn in a new tissue machine in Kostheim, Germany. Each of the machines has an annual capacity of 60,000 tons.

During the year, SCA decided to invest approximately SEK 300m to enhance the effi-ciency of its manufacturing structure for con-sumer tissue in Spain. Commissioning is sched-uled for 2014.

Investment in kraftliner mill in Obbola In2013,SCAdecidedtoinvestapproximatelySEK 500m in a new digester at its kraftliner mill in Obbola, Sweden. Commissioning is sched-uled for 2015.

Divestments in consumer tissue segment in Europe InconjunctionwithSCA’sacquisitionofGeor-gia-Pacific’s European tissue operations in 2012, the European Commission demanded that cer-tain divestments be made in the consumer tis-sue segment. These divestments were carried out by SCA and approved by the European Commission in 2013. The purchase price was approximately EUR 100m.

Divestment of publication paper mill in Austria In2013,SCAcompletedthedivestmentofitspublicationpapermillinLaakirchen,Austria.Inconnection with the divestment, the companies established a sales cooperation. The initial pur-chase price was EUR 100m, with a possible additional purchase price of not more than EUR 100m based on a two-year profit-sharing model.

Forest swaps In2013,SCAconductedanumberofforestswaps that increased its standing volume and enabled more efficient forest management and lower felling costs.

SCA Annual Report 2013Board of Directors’ Report 25

Acquisitions, investments and divestments | SCA Group

Other Group informationParent CompanyThe Group’s Parent Company, Svenska Cellu-losa Aktiebolaget SCA (publ), owns most of the forest land and other real estate relating to forest products operations, and grants felling rights for standing forest to the subsidiary SCA Skog AB. The Parent Company is otherwise a holding company with the main task of owning and man-aging shares in a number of business group companies and performing Group-wide man-agementandadministrativefunctions.In2013,the Parent Company recognized operating income of SEK 457m (98) and profit before appropriations and tax of SEK 5,870m (4,291). During the year, the Parent Company’s net investments and divestments in shares and par-ticipations in companies outside SCA amounted tonegativeSEK150m(pos:125).Investmentsinproperty and plant totaled SEK 1,056m (299) during the year. Cash and cash equivalents at year-end amounted to SEK 0m (0).

Research and development (R&D) Research and development costs during the year amounted to SEK 998m (845), correspond-ing to 1.1% of consolidated net sales. R&D is coordinated and conducted from a global per-spective. Product development is carried out in close cooperation with the local units, as well as through direct collaboration with customers. A slightly more long-term approach is adopted when it comes to R&D in the fields of materials and technology.

Holdings of treasury shares SCA implemented a directed cash issue of a total of 1,800,000 shares in 2001. These shares were subsequently acquired by SCA to be used for transfer to senior executives and key individ-uals under the employee stock option program. The program ended in 2009. Following the share split in 2007 and transfer of the shares under the concluded program, the company holds a total of 2,767,605 treasury shares.

Distribution of shares During the year, 5,860,602 Class A shares were converted into Class B shares. The proportion of Class A shares was 12.4% at year-end.

Dividend The Board of Directors proposes that the divi-dend be raised by 5.6% to SEK 4.75 (4.50) per share. The dividend is expected to total approxi-mately SEK 3,336m (3,161). Accordingly, divi-dend growth in the most recent five-year period amounted to 6.3%. The Board’s assessment is that the proposed dividend will provide the Group with the scope to fulfill its obligations and make the required investments. The record date for entitlement to receive dividends is proposed as April 15, 2014.

Environmental impact in Sweden In2013,SCAconducted15operationsforwhicha permit is required in Sweden. Operations for which permits are required accounted for 16% of consolidated net sales. Five permits relate to the manufacturing of pulp and paper. These operations impact the environment through emissions to air and water, solid waste and noise. Nine permits relate to the production of solid-wood and value-added products, and bio-fuel. These operations affect the environment through emissions to air and water, and noise. One permit relates to the manufacture of fuel pellets. This operation affects the environment through emissions to air and water, as well as noise.

Guidelines for remuneration of senior executives The Board of Directors has decided to propose to the 2014 Annual General Meeting the follow-ing unchanged guidelines for determining sala-ries and other remuneration for senior execu-tives to apply for the period following the Annual General Meeting.

“Remuneration to the CEO and other senior executives will be a fixed amount, possible vari-able remuneration, additional benefits and pen-sion. Other senior executives include Executive

Vice Presidents, Business Unit Managers and other equivalent managers, as well as Central Staff Managers. The total remuneration is to cor-respond to market practice and be competitive in the senior executive’s field of profession. Fixed and variable remuneration are to be linked to the executive’s responsibility and authority. For the CEO, as well as for other senior execu-tives, the variable remuneration is to be limited and linked to the fixed remuneration. The varia-ble remuneration is to be based on the outcome of predetermined objectives and, as far as pos-sible, be linked to the increase of value of the SCA share, from which the shareholders benefit. Programs for variable remuneration should be formulated so that the Board of Directors, if exceptional financial circumstances prevail, has the possibility to limit, or refrain from, payment of variable remuneration if such an action is con-sidered reasonable and in compliance with the company’s responsibility to shareholders, employees and other stakeholders.

Intheeventofterminationofemployment,the notice period should normally be two years should the termination be initiated by the com-pany, and one year, when initiated by the senior executive. Severance pay should not exist.

Pension benefits are to be either defined benefit or defined contribution plans, or a com-bination of both, and entitle the senior executive to pension from the age of 60, at the earliest. To earn the pension benefits, the period of employ-ment must be long term, at present 20 years. When resigning before the age providing entitle-ment to pension, the senior executive will receive a paid-up pension policy from the age of 60. Variable remuneration is not pensionable income. Matters of remuneration to senior exec-utives are to be dealt with by the Remuneration Committee and, as regards the President, be resolved by the Board of Directors.”

The Board’s proposal concurs with the guidelines adopted by the 2013 Annual General Meeting. For information concerning the compa-ny’s application of these guidelines and informa-tion on the company’s expenses, see Note 6 on pages 85–86.


SCA Group | Other Group information

Sales and earnings

Operating profit and operating margin Earnings per share after dilution effects Net sales, share of Group

Operating profit Operating margin

SEKm %

0

2,000

4,000

6,000

8,000

10,000

12,000

201320122011201020090

2

4

6

8

10

12


SEK

0

2

4

6

8

10

12

20132012201120102009


Tissue, 53 %


Personal Care, 30 %

Summary income statement

SEKm 2013 2012 2011

Net sales 89,019 85,408 81,337

Gross profit 22,013 20,959 19,636

Operating profit1) 9,934 8,646 7,738

Financial items –1,000 –1,264 –1,325

Profit before tax1) 8,934 7,382 6,413

Tax1) –2,542 –628 –1,635

Profit for the period from disposal group – 503 900

Profit for the year1) 6,392 7,257 5,6781) Excluding items affecting comparability amounting to an expense of SEK 1,251m before tax and an expense of SEK 828m after tax for 2013,

an expense of SEK 2,634m before tax and an expense of SEK 2,257m after tax for 2012, and an expense of SEK 5,439m before tax and an expense of SEK 5,071m after tax for 2011.

SCA’s operating profit for 2013, excluding items affecting comparability, exchange rate effects and divestments, rose 19% compared with the preceding year. Acquisitions in Europe, cost savings, increased volumes and gains from forest swaps yielded improved earnings.

Sales SCA’s net sales for 2013 increased year-on-year and amounted to SEK 89,019m (85,408). Exclud-ing exchange rate effects and divestments, sales rose 10% compared with the preceding year. Exchange rate movements reduced con-solidated net sales by 2%. Sales for Personal Care increased 6%, excluding exchange rate effects, while sales for Tissue rose 15%, exclud-ing exchange rate effects and divestments. The increase in sales in Personal Care and Tissue was mainly attributable to higher volumes and acquisitions.Inemergingmarkets,salesforPer-sonal Care and Tissue increased 10% and 13%, respectively, excluding exchange rate effects. Sales for Forest Products, excluding divest-ments, were largely unchanged compared with the preceding year.

Performance SCA’s operating profit for 2013, excluding items affecting comparability in a negative amount of SEK 1,251m (neg: 2,634), improved compared with the preceding year and amounted to SEK 9,934m (8,646). Operating profit for Personal Care, excluding items affecting comparability and exchange rate effects, rose 4%, while oper-ating profit for Tissue, excluding items affecting comparability, exchange rate effects and divest-ments, increased 27%. Forest Products increased its operating profit, excluding items affecting comparability, by 35%.

Financial items declined to an expense of SEK 1,000m (expense: 1,264). The decrease was attributable to lower interest rates and a lower average net debt during the year. Profit before tax, excluding items affecting comparability, exchange rate effects and divestments,

increased 25% to SEK 8,934m (7,382). The aver-age tax rate for operating earnings for the year, excluding items affecting comparability, was 28%. Profit for the year, excluding items affect-ing comparability after tax of negative SEK 828m (neg: 2,257), amounted to SEK 6,392m (7,257). Earnings per share attributable to own-ers of the Parent rose to SEK 9.08 (10.27) excluding items affecting comparability and to SEK 7.90 (7.06) including items affecting com-parability.

Key ratios The Group’s gross margin, excluding items affecting comparability, amounted to 24.7%, compared with 24.5% in the preceding year, and the operating margin was 11.2%, compared with 10.1% in 2012. The return on capital employed, excluding items affecting comparability, improved to 11% (10). The return on equity, excluding items affecting comparability, was 10% (12). The interest coverage ratio rose to 8.7, compared with 4.8 in the preceding year.

SEK

0

2

4

6

8

10

12

20132012201120102009



Sales and earnings | SCA Group

Capital expenditures

The Group’s cash flow

Operating cash flow by business area Operating cash flow, share of Group

Tissue, 56%


Personal Care, 32%

Personal Care Forest Products

Tissue

SEKm

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

20132012201120102009


Divestments Cash flow before dividend

Cash flow from current operations

Strategic capital expenditures, non-current assets

Acquisitions

SEKm

0

5,000

10,000

15,000

20,000

25,000

30,000

20132012201120102009–20,000

–15,000

–10,000

–5,000


Strategic capital expenditures Depreciation according to planCurrent capital expenditures, net

SEKm

01,0002,0003,0004,0005,0006,0007,0008,000

20132012201120102009


Summary operating cash flow statement

SEKm 2013 2012 2011

Operating cash surplus 13,492 12,624 11,982

Change in working capital –284 1,159 –665

Current capital expenditures, net –3,427 –3,161 –3,250

Restructuring costs, etc. –1,292 –978 –649

Operating cash flow 8,489 9,644 7,418

Financial items –1,000 –1,264 –1,325

Income taxes paid, etc. –1,500 –1,109 –787

Cash flow from current operations 5,989 7,271 5,306

Acquisitions –5,466 –14,872 –983

Strategic capital expenditures, non-current assets –1,868 –1,863 –1,637

Divestments 1,716 17,682 –15

Cash flow before dividend 371 8,218 2,671

Operating cash flowA high level of control of the operating cash flow is a key part of SCA’s long-term competitiveness strategy. Operating cash flow amounted to SEK 8,489m (9,644). The decrease is primarily attributable to the fact that the Group’s higher operating cash surplus did not fully offset its increased tied-up working capital and higher investments for the period compared with the preceding year.

Operating cash surplus rose 7% to SEK 13,492m (12,624). Working capital increased due to lower accounts payable. Working capital in proportion to net sales amounted to 8% (8). Current capital expenditures increased SEK 266m during the year and amounted to SEK 3,427m (3,161), cor-responding to 4% (4) of net sales. Operating cash flow amounted to SEK 8,489m (9,644).

Financial items declined SEK 264m to an expense of SEK 1,000m (expense: 1,264). The decrease was an effect of lower interest rates and lower average net debt during the year.

IncometaxpaymentsamountedtoSEK1,634m(1,193). Cash flow from current operations amounted to SEK 5,989m (7,271).

Strategic capital expenditures in plants made to strengthen organic growth totaled SEK 1,868m (1,863). The year’s expense for strategic capital expenditures primarily pertained to investments in Tissue in Germany and Russia, and in Forest Products in Sweden.

Net debt increased SEK 959m during the year and amounted to SEK 33,886m at year-end. Net cash flow, including acquired net debt in

Vinda, increased the Group’s net debt by SEK 2,831m. The fair value measurement of pension assets, pension obligations and financial instru-ments reduced net debt by SEK 2,223m. Exchange rate movements increased net debt by SEK 165m. The reclassification of non-cur-rent provisions to pension liability in accordance withIAS19increasednetdebtbySEK186m.

The debt/equity ratio declined to 0.51 (0.55), while the Group’s debt payment capacity was unchanged at 37% (37). The debt/equity ratio, excluding pension liabilities, was 0.48 (0.48).


SCA Group | Operating cash flow

Financial position

Net debt, debt/equity ratio and debt payment capacity

Return on capital employed Capital employed, share of Group

Tissue, 51%


Personal Care, 11%

Return on capital employed


%

8

9

10

11

12

20132012201120102009

Net debt Debt/equity ratio

SEKm %

0

10,000

20,000

30,000

40,000

50,000

20132012201120102009

Debt payment capacity

0

20

40

60

80

100

Assets and capital employedThe Group’s total assets increased 8% com-pared with the preceding year, amounting to SEK 142,272m (131,531). Non-current assets rose SEK 9,612m compared with the preceding to SEK 108,482m, of which property, plant and equipment increased SEK 5,101m to SEK 51,803m and intangible assets increased SEK 4,032m to SEK 21,661m. Current and strategic capital expenditures in property, plant and equipment amounted to SEK 5,292m and depre-ciation for the year to SEK 4,644m.

Current assets increased SEK 1,129m to SEK 33,790m (32,661). Working capital amounted to SEK 7,224m (6,625). Capital employed was 8% higher than in the preceding year and totaled SEK 100,190m (93,091). The distribution of capi-tal employed per currency is shown in the table below.

The value denominated in SEK of the Group’s foreign net assets amounted to SEK 58,306m at year-end,includingVinda.In2012,theGroup’sforeign net assets totaled SEK 55,776m.

Equity Consolidated equity amounted to SEK 66,304m (60,164) at year end. Net profit for the period increased equity by SEK 5,564m (5,000), while shareholder dividends reduced equity by SEK 3,202m (2,999). Equity increased by SEK 1,474m after tax due to remeasurements of the net pen-sion liability to fair value. The remeasurement of financial instruments to fair value increased equity by SEK 208m after tax. Exchange rate movements, including the effects of hedges of net investments in foreign assets, increased equity by SEK 280m. Acquisitions of non-con-trolling interests, which comprised outstanding minority shares in the German subsidiary SCA Hygiene Products SE, reduced equity by SEK 996m. Minority shares in the Chinese subsidiary Vinda increased equity by SEK 2,812m.

Financing The Group’s interest-bearing gross debt amountedtoSEK38,272matyear-end.In2012,interest-bearing debt totaled SEK 33,714m. The maturity period, excluding Vinda, was 2.8 (2.3) years.

Consolidated capital employed by currency, SEKm

2013 % 2012 % 2011 %

EUR 27,581 28 27,004 29 28,868 30

SEK 36,936 37 38,623 41 35,646 36

USD 6,067 6 6,550 7 7,564 8

GBP 4,894 5 5,489 6 6,167 6

Other 24,712 24 15,425 17 19,694 20

Total 100,190 100 93,091 100 97,939 100

Of which disposal group – – 15,194

Total excluding disposal group 100,190 93,091 82,745

Consolidated balance sheet

SEKm 2013 2012 2011

Intangible assets 21,661 17,629 12,062

Property, plant and equipment 51,803 46,702 42,599

Biological assets 28,767 27,503 26,729

Other non-current assets 6,251 7,036 4,121

Total non-current assets 108,482 98,870 85,511

Current assets 33,790 32,661 31,892

Assets in disposal group held for sale – – 21,601

Total assets 142,272 131,531 139,004

Equity 66,304 60,164 61,291

Non-current liabilities 42,008 38,740 41,219

Current liabilities 33,960 32,627 28,893

Liabilities in disposal group held for sale – – 7,601

Total equity and liabilities 142,272 131,531 139,004

Working capital 7,224 6,625 6,816

Capital employed 100,190 93,091 97,939

Net debt 33,886 32,927 36,648

Net debt amounted to SEK 33,886m (32,927) at year-end. Net cash flow, including acquired net debt in Vinda, increased the Group’s net debt by SEK 2,831m. Furthermore, net debt declined by SEK 2,223m due to the fair value measurement of pension assets, pension obligations and financial instruments. Exchange rate move-ments increased net debt by SEK 165m. The reclassification of non-current provisions to pensionliabilityinaccordancewithIAS19increased net debt by SEK 186m.

Key ratios The debt/equity ratio was 0.51 (0.55). Excluding pension liabilities, the debt/equity ratio was 0.48 (0.48). The visible equity/assets ratio was 44% (45). The return on capital employed (ROCE) and on equity (ROE), excluding items affecting com-parability, amounted to 11% (10) and 10% (12), respectively. The capital turnover rate was 0.95 (1.00). At year-end, working capital amounted to 8% (8) of net sales.


Financial position | SCA Group

Personal CareSCA is a global leader in personal care and has a portfolio of incontinence products, baby diapers and feminine care products. Within these product segments, SCA also offers such products as wet wipes, soap, baby oil, lotion and cotton pads. The products are sold under SCA’s global, regional and local brands as well as under retailers’ brands. Distribution channels for the products are the retail trade, pharmacies and care institutions.

In 2013, sales in the Personal Care business area amounted to approximately SEK 27bn. The single largest brand in the portfolio is TENA, a globally leading brand for incontinence products with annual sales exceeding SEK 10bn.

MarketThe global market for personal care products is valued at slightly more than SEK 330bn and is growing at a rate of some 5% annually.

SCA’s competitors in personal care are, for example, Kimberly-Clark, Procter & Gamble and Unicharm.

Shifts in global demographics such as popu-lation growth – due primarily to a lower infant mortality rate and increased longevity – and higher disposable incomes point to continued good growth for personal care products. The effect of the trend of higher disposable incomes is that more people prioritize hygiene when food and housing needs have been, or are in the pro-cess of being, satisfied. Consequently, market penetration and demand for personal care prod-ucts are rising in emerging markets. In many regions of the world, incontinence is surrounded by social taboo, and therefore increasing under-standing and acceptance of the condition are vital elements required for boosting market penetration.

The growth potential is greatest in emerging markets where penetration is significantly lower

Share of Group

Net sales, 30 %

SEK 26,914mCapital employed, 11%

SEK 11,077mOperating profit, 30 %

SEK 3,201mNo. of employeesat Dec. 31, 32%

10,718 employees

than in mature markets and where urbanization, improved infrastructure and the retail trade are evolving rapidly. One example of the lower mar-ket penetration in emerging markets is that dia-per consumption per capita in Asia is only about one-fifth of that in Western Europe.

In mature markets, baby diapers and feminine care products have attained high market pene-tration, while market penetration for inconti-nence products – for which demand is driven by such factors as an aging population – remains relatively low.


Business areas | Personal Care

SCA’s market positions

EuropeNorth

America Global

Incontinence products 1 3 1

Baby diapers 2 – 4

Feminine care 3 – 4

Data is based on market data and SCA’s estimates.

Personal care products – global market

Eastern Europe, 7 %

North America, 21 %

Latin America, 13%

Asia, 27%

Other, 15%

Western Europe, 17 %

EfficiencyAt the end of the year, SCA had production at 30 plants in 25 countries. Products are distrib-uted via the retail trade, pharmacies and care institutions.

During the year, SCA focused on the cost and efficiency program, launched in 2012, for its hygiene operations, meaning Personal Care and Tissue. The program is progressing according to plan and will generate annual cost savings of EUR 300m with full effect in 2015. The bulk of the savings will be made in production and sourcing. In terms of pro-duction, SCA is working to standardize activities by implementing the most efficient processes at all of its production facilities. For sourcing, the main focus is on achieving economies of scale by more efficiently central-izing sourcing and consolidating suppliers. The program also requires savings to be made in logistics, sales and administration. In 2013, total cost savings in the Personal Care and Tissue

business areas amounted to approximately SEK 1,050m.

Innovations and launchesIn 2013, SCA launched the incontinence product TENA Lady Extra Plus InstaDRY™. The product contains a unique new absorption concept, InstaDRY™, which enables absorption of a larger amount of fluid in a very short period of time. The product also offers Fresh Odour Con-trol, impeding bacteria growth and reducing odor. Thanks to InstaDRY™ technology, the pad is smaller, better adapted to body contours and features tapered edges for the best fit and dis-cretion. The pad is designed for women suffer-ing from medium bladder weakness.

SCA launched and upgraded the inconti-nence product TENA Pants with ConfioFit™ for users with greater protection needs. The prod-uct has a unique anatomical fit and slimmer mid section to ensure a more discreet incontinence product with enhanced comfort.

During the year, SCA launched TENA Identifi, a new technology that simplifies and increases the efficiency of the work carried out by care-givers and improves the quality of life for those with incontinence. Integrated electronic sensors in the incontinence product register urinary reg-ularity and volume in a log system. The informa-tion can then be analyzed and used to provide the appropriate treatment and protection to indi-viduals with incontinence.

During 2013, SCA introduced TENA U-test, an in-pad test card that facilitates detection of uri-nary tract infections among patients. The method simplifies diagnosis for caregivers and reduces patient discomfort compared with a urine test, which may require the use of a catheter.

During the year, SCA further developed its Libero diaper function, logotype, design, pack-aging and external communication. The prod-ucts were relaunched in the Nordic countries, Russia and China. SCA also sells baby diapers under the Sealer brand in China.

Net sales and operating margin Operating profit and ROCE Operating cash flow

Net sales Margin

SEKm %

0

5,000

10,000

15,000

20,000

25,000

30,000

201320122011201020090

3

6

9

12

15

18

SEKm

0

1,000

2,000

3,000

4,000

5,000

20132012201120102009

Operating profit ROCE

SEKm %

0

500

1,000

1,500

2,000

2,500

3,000

3,500

201320122011201020090

5

10

15

20

25

30

35



During 2013, SCA developed the Sealer diaper’s characteristics, design and packaging, and a new diaper that meet parents’ needs in the economy segment was launched.

In Mexico, SCA launched Saba Intimate Soap, complementing Saba’s feminine care product offering.

GrowthSCA’s target for the business area is annual organic growth of 5–7%.

In 2013, the Personal Care business area grew both organically and through acquisitions. Sales rose during the year in all product segments and global growth for the business area, excluding exchange rate effects, amounted to 6%. Acquisi-tions increased sales by 3%. Excluding exchange rate effects, the sales increase in emerging mar-kets was 10%. Emerging markets accounted for 38% of the business area’s sales in 2013.

During the year, SCA established operations in India and decided to invest SEK 150m in local

production of hygiene products. The plan is to commence production at the Group’s own plant in 2015. India’s large population and low use of hygiene products indicate potential for future growth. During 2013, SCA launched baby dia-pers in India under the Libero brand.

Incontinence productsSCA offers a broad range of incontinence prod-ucts under the TENA brand and is the clear global market leader. SCA’s offering, which includes both products and services, improves the quality of life for consumers while also reducing costs for institutional customers, such as nursing homes.

MarketIncontinence products is the Personal Care segment that has the highest rate of growth.

Incontinence, which is classed as a disease by the World Health Organization (WHO), affects 5–7% of the world’s population. Many indicators

point to the proportion of people affected increasing on a global scale as a result of an aging population. In five years, the population of the world over the age of 60 is estimated to pass the one billion mark. Market penetration is gen-erally low for incontinence products, particularly among men. In Europe, the degree of penetra-tion is less than 40%, while it is significantly lower in emerging markets. The occurrence of incontinence is two to three times more common among women than men and it is estimated that one-fourth of the world’s women aged over 35 will be affected at some point in their lives.

Institutional care and homecare account for about 60% of the global market for incontinence products. Here, the main focus is on supplying high-quality products combined with qualified advisory services that simplify handling proce-dures and reduce costs for care providers. The retail market accounts for approximately 40% of the global market.


Personal Care | Business areas

SCA’s businessSCA is the world leader in incontinence products through its global brand TENA, which has annual sales in excess of SEK 10bn.

SCA’s global market share in incontinence products is more than double that of the second largest player. SCA is the market leader in Europe, Asia (excluding Japan) and Latin Amer-ica. SCA prioritizes high growth in all segments, strengthened global market leadership and a continued focus on building leading positions in Eastern Europe, Russia, Asia, the Middle East and Latin America. China is a market with low penetration and an aging population with high growth potential for incontinence products. Over the past four years, SCA has trained 10,000 nurses from more than 1,200 hospitals in a num-ber of cities throughout the country. The response has been very positive and, in 2013, about 3,200 nursing assistants and more than 1,000 managers of care institutions received training.

Since in many parts of the world, inconti-nence is surrounded by a social taboo, it is cru-cial to raise understanding and acceptance of the disease and enhance quality of life. SCA is endeavoring to break this taboo by providing information and through marketing activities, training and global forums. SCA offers products that enhance quality of life for people with incon-tinence.

SCA, with the TENA brand, has large growth potential in incontinence products thanks to an aging population and low market penetration. For the retail trade, SCA works with information, advertising and the development of increasingly discrete, comfortable, easy-to-use and effective products, always with the customer and con-sumer benefits in mind.

Incontinence products – global market

Incontinence products – sales channels, global market

Eastern Europe, 6%

North America, 27%

Latin America, 7%

Asia, 25%

Other, 4%

Western Europe, 31%

Retail trade, 40 %

Institutional and homecare, 60 %

Use of incontinence products

Units/per person with incontinence/per year

0

100

200

300

400

500

600

AsiaLatinAmerica

EasternEurope

WesternEurope

NorthAmerica




Baby diapers – global market

Baby diapers – brand categories, European market

Use of baby diapers

Eastern Europe, 7%

North America, 21%

Latin America, 16%

Asia, 24%

Other, 18%

Western Europe, 14%

Retailers’ brands, 21%

Brands, 79%

Units/per child up to 2.5/per year

0

500

1,000

1,500

2,000

AsiaLatinAmerica

EasternEurope

WesternEurope

NorthAmerica

Baby diapersSCA offers baby diapers and baby-care prod-ucts and is the world’s fourth largest player in the segment.

MarketThere are about 400 million children under the age of 2.5 in the world today. While the markets in Western Europe and North America have high penetration, the majority of children worldwide still do not enjoy the practical and effective hygiene provided by daily use of disposable dia-pers, thus indicating considerable future poten-tial for SCA. The most significant market growth is taking place in Asia, Latin America, the Middle East and Africa, where birth rates are high at the same time as infant mortality rates are falling and household incomes are rising.

SCA’s businessSCA is the world’s fourth largest player in the baby diaper segment and holds the number two position in Europe. In Europe, SCA markets baby diapers under its own Libero brand and under retailers’ brands. SCA’s strongest market is the Nordic region, where the Libero brand is the market leader.

SCA works to strengthen the positions of its own brands in mature markets, including the Nordic region and New Zealand, and in fast-growing markets in Eastern Europe, Russia, Latin America, the Middle East and Asia. Emerg-ing markets have good potential for continued growth due to low market penetration of baby diapers and growing demand.




Feminine careSCA is the world’s fourth largest player in femi-nine care. SCA offers a broad product portfolio that includes pads, panty liners, tampons and intimate soaps.

MarketThe growth potential for feminine care products is greatest in emerging markets where market penetration is significantly lower than in mature markets.

SCA’s businessSCA is the world’s fourth largest player in femi-nine care and the third largest in Europe. SCA is a market leader in Latin America, Australia and New Zealand.

A large and growing share of SCA’s sales is taking place in emerging markets such as Latin America, Russia, Eastern Europe, the Middle East and Asia. In emerging markets, SCA offers packs with fewer feminine care products and products in the economy segments in an effort to increase availability.

Examples of regional brands supported by SCA’s global brand platform include Libresse in the Nordic region, Russia and Malaysia, Libra in Australia, Bodyform in the UK, Nana in France and Saba and Nosotras in Latin America.

SCA views it as an important task to promote awareness of hygiene and menstruation. School programs are under way in Latin America, Asia and Europe that aim to educate girls about what happens to their bodies during puberty and when they have their period.

Feminine care – global market

Feminine care – brand categories, European market

Use of feminine care


Retailers’ brands, 16%

Brands, 84%

Eastern Europe, 8%

North America, 16%

Latin America, 14%

Asia, 33%

Other, 14%

Western Europe, 15%

Units/per woman aged 15–49/per year

0

100

200

300

400

AsiaLatinAmerica

EasternEurope

WesternEurope

NorthAmerica



KEY EVENTS

• EstablishedoperationsinIndia.• Costandefficiencyprogramdelivered

according to plan.

SCA’s sales by regionSCA’s sales by product segment

Baby diapers, 29%

Feminine care, 15%

SCA’s sales to retailers’ brands as a proportion of total sales:Incontinence products, 1%Baby diapers, 29%Feminine care, 8%

Incontinence products, 56%

North America, 9%

Latin America, 14%

Asia, 12%

Other, 3%

Europe, 62%

Operating profit, SEKm:

3,201 Operating margin:

12 %

Key figures1)

SEKm 2013 2012

Net sales 26,914 26,294

Operating cash surplus 4,162 4,091

Change in working capital –28 313

Current capital expenditures –780 –573

Other operating cash flow –247 –245

Operating cash flow 3,107 3,586

Operating profit 3,201 3,180

Operating margin, % 12 12

Capital employed 11,077 11,303

ROCE, % 28 28

Strategic investments

plant and equipment –159 –63

company acquisitions/divestments –22 –1,744

Average number of employees 10,800 10,914

No. of employees at Dec. 31 10,718 11,0741) Excluding restructuring costs.

Operations in 2013

Net sales increased by 2% (6% excluding exchange rate effects) and amounted to SEK 26,914m (26,294). Higher volumes and acquisi-tions increased sales by 3% and 3%, respec-tively. In emerging markets, sales increased by 10%, excluding exchange rate effects.

Sales for incontinence products under the globally leading TENA brand rose by 6%, excluding exchange rate effects, driven primarily by emerging markets and good growth in Europe. Sales of baby diapers increased by 2%, excluding exchange rate effects, mainly related to Eastern Europe and acquisition in Asia. Sales for feminine care rose by 7%, excluding exchange rate effects, which was mainly attributable to emerging markets.

Operating profit, excluding items affecting comparability, was 1% higher than in the pre-ceding year (4% excluding exchange rate effects) and amounted to SEK 3,201m (3,180). Earnings were impacted positively by higher volumes, cost savings and acquisitions. Invest-ments in increased marketing activities led to higher volumes, but weighed down earnings, mainly for baby diapers. Increased raw material costs and exchange rate effects negatively impacted earnings. Incontinence products and feminine care products reported improved profit, while profit for baby diapers was lower.

Operating margin was 11.9% (12.1).

Return on capital employed amounted to 28% (28).

Operating cash surplus was SEK 4,162m (4,091). Operating cash flow declined to SEK 3,107m (3,586) as a result of a higher level of working capital and increased investments.

Capital expenditures amounted to SEK 939m (636).



TissueSCA is a global leading consumer tissue and Away-from-Home (AfH) tissue company. The consumer tissue product portfolio comprises toilet paper, kitchen rolls, facial tissues, handkerchiefs and napkins. Products are sold both under own and retailers’ brands. In the AfH tissue segment, SCA develops and markets complete hygiene solutions comprising dispensers, tissue, soap, service and maintenance to hospitals, large workplaces, industries, restaurants and hotels, under the globally leading brand Tork.

Sales in the Tissue business area in 2013 totaled approximately SEK 47bn. In the AfH segment, the globally leading brand Tork is the business area’s single largest brand, with sales exceeding SEK 10bn annually.

MarketThe global market for tissue is valued at slightly more than SEK 410bn and is growing by 4% annually.

SCA’s competitors in tissue are, for example, Georgia-Pacific, Kimberly-Clark and Sofidel.

Shifts in global demographics such as popu-lation growth – due primarily to a lower infant mortality rate and increased longevity – and higher disposable incomes point to continued good growth for tissue. The effect of the trend in higher disposable incomes is that more people prioritize hygiene when food and housing needs have been, or are in the process of being, satis-fied. Consequently, market penetration and demand for tissue are rising in emerging markets.

The growth potential is greatest in emerging markets where market penetration is signifi-cantly lower than in mature markets and where urbanization, improved infrastructure and the retail trade are evolving rapidly. One example of the lower market penetration in emerging mar-kets is that tissue consumption per capita per year in Eastern Europe is only about a quarter of that in Western Europe. Growth is also occurring

Share of Group

Net sales, 53%


SEK 50,044mOperating profit, 53 %

SEK 5,595mNo. of employeesat Dec. 31, 56%

18,730 employees

in mature markets owing to lifestyle changes and innovations that lead to increased use.

EfficiencySCA produces tissue at 54 plants in a total of 19 countries.

During the year, SCA focused on the cost and efficiency program, launched in 2012, for its hygiene operations, meaning Personal Care and Tissue. The program is progressing according to plan and will generate annual cost savings of EUR 300m with full effect in 2015. The bulk of the savings will be made in production and sourc-ing. In terms of production, SCA is working to standardize activities by implementing the most efficient processes at all of its production facili-

ties. For sourcing, the main focus is on achieving economies of scale by more efficiently centraliz-ing sourcing and consolidating suppliers. The program also requires savings to be made in logistics, sales and administration. In 2013, total cost savings in the Personal Care and Tissue business areas amounted to approximately SEK 1,050m.

In conjunction with the acquisition of Georgia-Pacific’s European tissue operations, synergies were identified that will lead to annual cost savings of EUR 125m with full effect in 2016. The Group’s efforts to realize cost synergies progressed as planned in 2013. The savings achieved pertained to production, sourcing, logistics, sales and administration.


Business areas | Tissue

Use of tissue

Kg/per capita/per year

0

5

10

15

20

25

AsiaLatinAmerica

EasternEurope

WesternEurope

NorthAmerica

Tissue – global market

Eastern Europe, 5%

North America, 31%

Latin America, 13%

Asia, 22%

Other, 8%

Western Europe, 21%

SCA’s market positions

Europe North

America Global

Consumer tissue 1 – 2

AfH tissue 1 3 1


Cost savings of SEK 385m were achieved in 2013.

Innovations and launchesIn response to demands for intelligent hygiene solutions, which are driven by greater awareness of hygiene and pandemic threats, SCA launched the Tork Elevation H1 Sensor touch-free hand towel dispenser in 2012. During 2013, the Tork Intuition Sensor touch-free foam soap dispenser was launched. The foam soap and the paper tow-els are dispensed without the user being required to touch anything, which improves hygiene and reduces the spread of infection.

SCA’s Tork Xpressnap guarantees custom-ers in the AfH segment a significant reduction in napkin usage compared with conventional dis-

pensers. Its one-at-a-time napkin dispensing system reduces the amount used and waste, and is also positive from both a hygiene and sus-tainability perspective. The dispenser also has a larger capacity than conventional models, cut-ting down on work and maintenance. During 2013, SCA launched the Cray dispenser, a new, more elegant model of Tork Xpressnap, which is an attractive feature on countertops and tables or beside wash basins. It is available with a stainless steel finish, or in black or white plastic.

During the year, SCA launched a portable Tork dispenser for wiping paper that can be used in restaurant kitchens and can be easily moved between work stations. The dispenser also has a docking station on which the paper holder can be mounted, thereby also functioning

as a stationary solution. It is an intelligent prod-uct for food preparation environments that sim-plifies the work of the user and promotes better hygiene.

SCA also launched Tempo Cotton Touch, a new handkerchief containing cotton to provide a stronger and softer product.

During the year, SCA launched Familia Fami-tex in Colombia via its joint venture there. Familia Famitex is a durable and strong paper towel for cleaning purposes that can be reused several times and represents a hygienic alternative to kitchen and cleaning cloths. Familia Famitex is available in three different colors for use is dif-ferent cleaning areas around the home.

Net sales and operating margin Operating profit and ROCE Operating cash flow

SEKm %

0

10,000

20,000

30,000

40,000

50,000

60,000

201320122011201020090

2

4

6

8

10

12

Net sales Margin

SEKm

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

20132012201120102009


SEKm %

0

1,000

2,000

3,000

4,000

5,000

6,000

201320122011201020090

3

6

9

12

15

18



GrowthSCA’s target for the business area is annual organic growth of 3–4%.

In 2013, the Tissue business area grew both organically and through acquisitions. Sales rose during the year in both product segments and global growth for the business area, excluding exchange rate effects and divestments, amounted to 15%. Acquisitions increased sales by 12%. The sales increase in emerging markets was 13%, excluding exchange rate effects. Emerging markets accounted for 18% of the business area’s sales in 2013.

During the year, SCA became the majority shareholder in the Chinese tissue company Vinda, with ownership of 51.4%. Vinda is the third largest tissue company in China, which is the world’s second largest tissue market. SCA aims to develop the collaboration with Vinda and use its extensive and strong distribution net-work. SCA will consolidate Vinda from the first quarter of 2014.

During 2013, SCA established operations in India and decided to invest SEK 150m in local production of hygiene products. The plan is to commence production at the Group’s own plant in 2015. India’s large population and low use of hygiene products indicate potential for future growth. In 2013, SCA launched its Tempo con-sumer tissue in India.

Consumer tissueSCA is the world’s second largest supplier of consumer tissue, which includes toilet paper, kitchen rolls, facial tissues, handkerchiefs and napkins.

Brand categories for consumer tissue, European market

Product breakdown for consumer tissue, European market


Retailers’ brands, 53 %

Brands, 47 %

Kitchen roll, 21%

Handkerchiefs, 8%

Facial tissues, 5%

Napkins, 5%

Other, 2%

Toilet paper, 59%

MarketGrowth in mature markets is in the low single-digit figures, while it is considerably higher in emerging markets.

Emerging markets are growing at a faster rate than mature markets due to increasing dis-posable incomes and greater use of tissue. Growth is also occurring in mature markets owing to lifestyle changes and innovations that lead to increased use.

SCA’s businessIn the market for consumer tissue, SCA holds the global number two position. In Europe, SCA is the clear market leader with a market share of more than double that of the second largest player. SCA also commands strong positions in many emerging markets, such as Russia and Colombia, where SCA is the market leader, and in Mexico, where it holds the number two posi-tion. SCA holds the number three position in China through its majority shareholding in Vinda.

Products sold under own brands account for about 50% of SCA’s sales, while the remaining 50% is sold under retailers’ brands. SCA’s brand portfolio comprises several strong regional and local brands. Tempo, Zewa, Plenty and Lotus hold leading positions in large areas of Europe, while Cushelle, Velvet and Edet are strong in the UK and the Nordic region. In Hong Kong, Tempo is the clear market leader in handkerchiefs. In South America, SCA markets products under the Familia and Favorita brands, and holds strong positions in emerging markets including Colombia, Chile and Ecuador. In the Mexican market, SCA occupies a strong position with the Regio brand and, in Australia, SCA is the second


Tissue | Business areas

largest supplier of tissue through its joint ven-ture. Vinda is one of the leading brands in China.

In Europe, the aim is to further strengthen brand positions while retaining the important retailers’ brands market. Therefore, for a number of years now, SCA has been working with a full-service offering that includes production and delivery, as well as partnerships for product development, product range, design, marketing and logistics in collaboration with some of the leading European retail chains.

AfH tissueWith the global Tork brand, SCA is the world’s largest supplier of AfH tissue. The AfH segment comprises institutions and companies, including hospitals, healthcare institutions, large work-places, industries, restaurants and hotels, for which SCA develops and sells complete hygiene solutions comprising dispensers, tissue, soap, service and maintenance. The products are dis-tributed by wholesalers and service companies.

MarketGrowth in mature markets is in the low single-digit figures, while it is considerably higher in emerging markets.

Emerging markets are growing at a faster rate than mature markets due to increasing dis-posable incomes and rising use of tissue.

SCA’s businessFor AfH tissue, SCA is a world leader with the global Tork brand, which has annual sales in excess of SEK 10bn.

The global brand Tork provides significant synergies since the difference in consumer and customer requirements is minimal in regard to tissue and dispensers in the various parts of the world.

SCA is the clear market leader in Europe and commands a market share that is about double that of the second largest player. SCA is the third largest player in North America. SCA’s market position is particularly strong in the fast-food restaurant sector in North America, where nearly every second napkin is supplied by SCA. The Group also commands strong positions in emerging markets, such as Russia and Colom-bia, where SCA is the market leader. In 2013, Lotus Professional, the brand included in the acquisition of Georgia-Pacific’s European tissue operations, was migrated to Tork.



KEY EVENTS

• MajorityshareholderinVinda,with ownership of 51.4%.

• OperationsestablishedinIndia.• Costandefficiencyprogramdelivered

according to plan.• CostsynergiesfromGeorgia-Pacific

acquisition delivered according to plan.

Operations in 2013

Net sales rose by 11% (15% excluding exchange rate effects and divestments) and amounted to SEK 46,987m (42,375). Higher vol-umes increased sales by 3%. Acquisitions increased sales by 12% while divestments reduced sales by 2%. Sales in emerging markets grew by 13%, excluding exchange rate effects.

Sales of consumer tissue increased by 16%, excluding exchange rate effects and divest-ments, mainly as a result of acquisition in Europe.

Sales of AfH tissue increased by 16%, excluding exchange rate effects, principally attributable to acquisition in Europe.

Operating profit, excluding items affecting comparability, improved by 21% (27% excluding exchange rate effects and divestments) to SEK 5,595m (4,640). The improvement in earnings was due to acquisitions, increased volumes and cost savings. Acquisitions accounted for 9 per-centage points of the earnings improvement. Higher energy and raw material costs, negative exchange rate effects and slightly lower prices reduced earnings.

Operating margin was 11.9% (10.9).

Return on capital employed amounted to 13% (13).

Operating cash surplus increased to SEK 8,061m (6,871). Operating cash flow declined to SEK 5,409m (6,154). The higher operating cash surplus did not offset the higher tied-up working capital and increased restructuring costs.

Capital expenditures amounted to SEK 2,393m (2,571).

SCA’s sales by region SCA’s sales by product segment

AfH tissue, 39%

Consumer tissue, 61%

North America, 15%

Latin America, 9%

Asia, 1%

Europe, 75%



12 %

Key figures1)

SEKm 2013 2012

Net sales 46,987 42,375


Change in working capital –492 744

Current capital expenditures –1,484 –1,432






ROCE, % 13 13


plant and equipment –909 –1,139

company acquisitions/divestments –4,752 –9,746




Tissue | Business areas

Forest ProductsSCA is Europe’s largest private forest owner, encompassing some 2.6 million hectares of forest land and produces forest products with a strong environmental profile. Operations are based on in-depth customer insight, high innovative ability and a sustainability perspective at all levels. SCA offers publication papers, kraftliner (packaging papers), pulp, solid-wood products and renewable energy.

The Forest Products business area reported sales of approximately SEK 15.5bn in 2013 and offers publication papers, kraftliner (packaging papers), pulp, solid-wood products and renewa-ble energy. SCA has a well-integrated supply chain in Sweden between its forest holdings and production facilities.

The forest is a unique resourceSCA is Europe’s largest private forest owner.

The forest is a unique resource that offers us access to high-quality forest raw materials, which are then converted into solid-wood prod-ucts, pulp, publication papers and kraftliner in our production process. The forest also makes a positive contribution to SCA’s environmental practices, enabling energy production from wind power and biofuels while at the same time storing and binding carbon dioxide.

From a community perspective, forests also contribute to biodiversity while at the same time providing a source for nature experiences and recreation. Responsible forest management and replanting of trees may be one of the solutions to climate change. SCA’s forests display a net growth rate and the company’s growing forests absorb 2.6 million tons of carbon dioxide annu-ally, which exceeds the emissions from SCA’s use of fossil fuels in production.

EfficiencyAt the end of 2013, SCA conducted manufactur-ing activities at 18 sites. Having its own logistics is part of the company’s integration strategy,

Share of Group

Net sales, 17%


SEK 38,103mOperating profit, 17%

SEK 1,843mNo. of employees at Dec. 31, 12%

4,087 employees

with loading and unloading terminals in Sweden and on the continent and freight transportation on vessels.

SCA’s forest assets and industries are con-centrated to northern Sweden, where the Group has built up an efficient supply system for its own mills and sawmills. The company’s forest holdings are managed on a very long-term basis. Integration of SCA’s own wood raw mate-rial is a key aspect of the company’s strategy that contributes to stable cash flow and reliable supplies, and facilitates improved quality and cost control. SCA’s forest holdings are a unique resource and comprise a renewa-ble raw materials base for products, materi-als and energy that will grow in importance. Productive and cost-effective production facilities are two necessary components for favorable profitability. SCA thus applies what is referred to as the strong-mill con-cept, which focuses resources on a number of large, high-tech paper and pulp mills and sawmills located in Sweden.

In 2012, SCA introduced a program to enhance the efficiency of the forest prod-ucts operation. The program will result in an annual earnings improvement of approximately SEK 1.3bn with full effect in 2015. The program includes a structured plan to reduce fixed and vari-able costs, achieve improved income

through increased production and efficiency enhancement, and implement a changed prod-uct and market mix. The efficiency program delivered according to plan in 2013. Measures included the closure of two smaller sawmills which, combined with other rationalization actions, led to a workforce reduction of about 200 employees. In 2013, the program generated an earnings improvement of SEK 550m.


Business areas | Forest Products

Net sales and operating margin* Operating profit and ROCE* Operating cash flow*

Net sales Margin

SEKm %

0

5,000

10,000

15,000

20,000

201320122011201020090

5

10

15

20

SEKm

0

500

1,000

1,500

2,000

2,500

3,000

3,500

20132012201120102009


SEKm %

0

500

1,000

1,500

2,000

2,500

3,000

201320122011201020090

2

4

6

8

10

12

Innovations and launchesInnovation is an integral part of the business area’s strategy to move its operations toward increasingly advanced products in high-value segments and toward more attractive customer offerings. The focus is on profitable growth through further processing and customization in segments with favorable price trends. In doing this, SCA differentiates itself from the rest of the industry, while also meeting requirements of business partners and customers.

A clearer structure was created for innova-tion activities at Forest Products during 2013. A new position was established with the task of driving innovation and an innovation portfolio was defined for all divisions in Forest Products. The business area’s management continues to assign high priority to the development of the innovation portfolio.

During the year, a new product area was launched, Sustainable Packaging, for fresh fiber-based packaging paper designed for use as flexible packaging, the surface layer in various packaging products and as corrugated board. The products combine excellent printa-bility and efficient resource utilization with highly attractive properties in terms of the environment and product safety. The target is to produce 75,000 tons of the new products at the Ortviken paper mill within two years.

In solid-wood products, SCA develops and processes purpose-designed products for either industrial further processing in efficient supply chains or for the building materials trade. The share of wood products sold via traditional distribution channels is constantly declining. In 2013, sales to the building materials trade in the UK doubled and now about 30% of SCA

Timber’s entire operations comprise sales to this segment, with their rigorous demands on distri-bution, service, warehousing and integration with suppliers’ business systems.

Development programs are not solely focused on products, but also on the creation of business models, service and distribution solutions in close collaboration with SCA’s customers.

GrowthContinuing the work on enhancing efficiency and customer-driven innovation is essential for strengthening positions and creating growth. Efforts to develop and streamline the supply chain, make it more sustainable, and develop new product areas are also significant in terms of strengthening competitiveness.

Timber continues to strengthen its long-term position as a construction material and its

* Reclassified for 2010 and 2011 with kraftliner due to the divestment of the European packaging operations on June 30, 2012.



favorable environmental and climate properties have resulted in incentives in several countries to encourage increased wood utilization. Timber also comes from a source of raw materials that is completely renewable, namely, the forest.

Activities continued in the SCA Energy busi-ness unit, which is tasked with managing and developing SCA’s renewable energy business.

SCA has set itself a target to increase wind power generation on the Group’s forest land to 5 TWh by 2020. SCA’s wind-power initiative has three components:• developmentofpartnershipprojects• developmentofproprietaryprojects• leasingofland

In2007,SCAandStatkraftformedajointlyowned company, the purpose of which is to establish six wind farms with an annual output of about 3 TWh. Stamåsen, the first of these six wind farms, was inaugurated in 2013. Stamåsen wind farm encompasses 26 wind turbines that will generate an annual output of about 200 GWh. An investment decision has been taken on a total of 186 wind turbines with a combined annual production output of 1.6 TWh. The tur-bines are expected to be operational by 2015.

WorkcontinuedontheprojectsSCAiscarry-ing out together with Fred.Olsen Renewables and E.ON, both of which have the potential to generate about 2 TWh of wind power electricity per year. SCA also continued its work on developingproprietaryprojects.

Market for forest productsThe European market for publication papers is valued at approximately SEK 90bn. Future demand is expected to decline as a conse-quence of lower readership of printed media and more intense competition for advertising expen-ditures from electronic media.

The European market for kraftliner, paper for corrugated board packaging manufactured from fresh wood fiber, is valued at approximately SEK 30bn and growth over an economic cycle is approximately 1–2% per year.

The European market for solid-wood prod-ucts is valued at some SEK 120bn, with demand primarily deriving from the construction and house building industries, which are relatively cyclical. Future growth is expected to amount to 2%. The industry is dominated by many small and mid-sized producers. Combined, the five leading suppliers – located in Scandinavia and Central Europe – account for only 13% of the European market.

The pulp market for long-fiber pulp has long-term growth of 2% per year.

SCA’s competitors in forest products are, for example, Holmen, Smurfit Kappa, Stora Enso and UPM.

SCA’s businessSCA is one of the world’s largest suppliers of FSC®-certified forest products.

The divestment of SCA’s publication paper mill in Laakirchen was completed in 2013. Fol-lowing this divestment, all of Forest Product’s production of paper, pulp and solid-wood prod-ucts is concentrated to northern Sweden, close to SCA’s forest holdings. The divestment also means that SCA has further reduced its expo-sure to the publication paper market. A portfolio of packaging paper products was introduced at

the only remaining publication paper mill, Ort-viken, that supplements the production of publi-cation paper and expanded the offering of pack-aging paper products from both the Obbola and Munksund kraftliner mills.

SCA’s sales of publication papers mainly take place within the Western European market. The single largest markets are the Nordic region, Germany and the UK. Ortviken paper mill has the capacity to produce 100% value-added paper grades and has reduced its exposure to standard newsprint. Both of the publication paper grades, Grapholnvent and GraphoSilk, introduced in 2012 were well received by customers.

SCA is Europe’s third largest supplier of packaging paper based on fresh wood fiber – kraftliner. SCA’s kraftliner mill in Munksund


Forest Products | Business areas

specializes in White-Top Kraftliner with good printability, while the kraftliner mill in Obbola specializes in more robust grades and higher wet strength packaging paper.

During the year, investments of SEK 540m were made to rebuild the paper machine and soda recovery boiler in Munksund, which ena-bled increased production, mainly for White-Top Kraftliner. An investment in the biofuel-fired lime kiln is being made and will be completed in 2014. In 2013, SCA decided to invest approximately SEK 500m in a new digester in Obbola. This investment is a replacement investment that will increase production and improve energy effi-ciency at the site.

SCA’s sawmill operation is the second larg-est in Europe. The strategy for solid-wood prod-ucts is to move toward more value-added and customized products in markets and with cus-tomers that offer long-term growth. SCA’s own raw materials, production and logistics exper-tise, combined with close cooperation with cus-tomers, generate competitive advantages.

SCA is a qualified supplier of purpose-designed wood products to industry for further processing into such items as panels, floors, windows, doors and furniture. Finished-wood components for window manufacturing, for example, represents another high-growth mar-ket. Products for the building materials trade are delivered planed and pre-packaged.

Service and advanced logistics solutions are of key significance for the building materials trade. SCA works in close cooperation with its customers in its principal markets in Scandina-via, France and the UK. Partnerships were initi-ated with the two largest building materials chains in the UK: Wickes, which targets the DIY (Do-It-Yourself) market, and Travis Perkins, which focuses on professional building materials customers. SCA will supply Travis Perkins with an entire range of planed products, and those products produced in Sweden will therefore be further processed in the UK. Production at a new planing line near Hull began in 2013 and will reach full capacity in 2014.

In the pulp market, SCA has positioned itself in the high-quality segment based on its excel-lent access to, and expertise in, the unique Nor-dic long-fiber forest raw material. Östrand pulp mill has an annual capacity of 530,000 tons. Approximately 40% of this capacity is utilized within SCA for production of tissue and publica-tion papers while the remainder is sold to exter-nal customers.

During 2013, SCA invested SEK 380m in an expanded partnership with Sundsvall Energi. Östrand pulp mill, which already supplies district heating to the Municipality of Timrå, was con-nected to the Sundsvall district heating grid. Ortviken paper mill rebuilt two boilers enabling them to be fuelled with pellets, and tripled its deliveries to the Sundsvall district heating grid.

SCA is Europe’s largest private forest owner with a holding of 2.6 million hectares of FSC® and PEFC™-certified forest land, of which 2 mil-lion is cultivated. Over the past 50 years, the standing volume in SCA’s forests has increased

by nearly 50%, at the same time as growth, and thus the sustainable harvesting potential, has more than doubled.

In 2013, SCA’s Bogrundet nursery in Sweden produced 101 million seedlings, of which 60% was sold externally.

SCA is one of Europe’s largest suppliers of forest-based biofuels, such as tree branches, crowns, stumps, bark, sawdust, peat and pro-cessed products, which includes pellets and briquettes. In 2013, production of biofuel amounted to 3 TWh.



SCA’s sales by regionSCA’s sales by product segment

SC paper, 5%

Newsprint, 9%

Solid-wood products, 29%

Pulp, 14%

Timber, 3%

Kraftliner, 23%

LWC paper, 17%

Asia, 10 %

Africa, 2 %

North America, 1%

Latin America, 1%

Europe, 86 %



12 %KEY EVENTS

• Efficiencyprogramdeliveredaccordingto plan.

• Divestedthepublicationpapermill in Laakirchen, Austria.

• InauguratedfirstwindfarmaspartofjointlyownedcompanywithStatkraft.

Key figures1)

SEKm 2013 2012

Net sales 15,525 18,283

of which internal 367 1,272


Change in working capital 346 85

Current capital expenditures –1,027 –1,116






ROCE, % 5 4


plant and equipment –801 –661

company acquisitions/divestments 817 –286



Operations in 2013

Net sales declined by 15% (unchanged, exclud-ing divestments) and amounted to SEK 15,525m (18,283). Higher volumes increased sales by 1%, while lower prices (including exchange rate effects) reduced sales by 1%. Divestments reduced sales by 15%.

Sales of publication papers fell on account of lower prices (including exchange rate effects) and divestments. Higher volumes had a positive impact on sales of publication papers. For kraft-liner, sales declined as a result of lower volumes, which were not fully offset by higher prices. Sales of solid-wood products increased due to higher volumes and prices (including exchange rate effects). For pulp, sales declined as a result of lower volumes, which were not fully offset by higher prices.

Operating profit, excluding items affecting comparability, rose by 35% to SEK 1,843m (1,363). Cost savings and lower raw material costs had a positive effect on earnings. The higher earnings were also attributable to gains of SEK 583m (91) on forest swaps. Lower prices, negative exchange rate effects of SEK 190m due to a stronger Swedish krona, higher energy costs and costs for extended maintenance stops reduced earnings.

The operating margin was 11.9% (7.5).

Return on capital employed was 5% (4).

Operating cash surplus amounted to SEK 1,927m (2,313), while the operating cash flow was SEK 1,084m (1,223).

Capital expenditures totaled SEK 1,828m (1,777).


Forest Products | Business areas

Corporate Governance

Governance at SCA

The task of corporate governance is to ensure the Group’s commitments to all of its stakeholders: shareholders, custom-ers, suppliers, creditors, society and employees. At the same time, governance must be structured in a way that supports the company’s long-term strategy, market presence and competitiveness. Corporate governance must be reliable, clear, simple and business-oriented.

Corporate governance, including remuneration, Pages 50–59This section describes the rules and regulations and the Group’s corporate governance, including a description of the operational organization. It also details the Board of Directors’ responsibili-ties and its work during the year. Information regarding remuneration and remuneration issues in SCA and internal control in the Group are also

included here. SCA applies the Swedish Code of Corporate Governance without any deviations.

Risk management, Pages 60–65SCA’s processes to identify and manage risks are part of the Group’s strategy work and are pursued at a local and Group-wide level. The section dealing with risk management describes the most significant risks, and the policies and

measures that the Group applies to manage these.

Sustainability, Pages 10–11, 14SCA’s sustainability work is an integral part of the company’s business model. The sustainabil-ity work helps the company reduce risk and costs, strengthen competitiveness and attract talent and investors.

Annual General MeetingThe Annual General Meeting (AGM) is SCA’s highest decision-making body, which all share-holders are entitled to attend, to have a matter considered and to vote for all shares held by the shareholder. The company’s Board of Directors is elected at the AGM. The AGM also appoints the company’s auditor.

Nomination CommitteeThe Nomination Committee represents the com-pany’s shareholders and is charged with the sole task of drafting proposals for adoption at the AGM with respect to election and remunera-tion matters and, in certain cases, proposing procedural motions for the next Nomination Committee.

Board of DirectorsThe Board of Directors has overall responsibility for the company’s organization and administra-tion through regular monitoring of the business and by ensuring the appropriateness of the organization, management team, guidelines and internal control. The Board approves strategies and targets, and decides on major investments, acquisitions and divestments of operations among other matters.

In accordance with the decision of the AGM, the Board of Directors shall comprise nine mem-bers elected by the AGM with no deputies. In addition, the Board shall include three members and three deputies appointed by the employees.

Chairman of the BoardThe Chairman of the Board leads the work of the Board and is responsible for ensuring that it is effectively organized and that work is efficiently conducted. This includes continuously monitor-ing the company’s operations in close dialog with the President and CEO and ensuring that other Board members receive information and decision data that will enable high-quality dis-cussion and decisions by the Board. The Chair-man leads the assessment of the Board’s and the President’s work. The Chairman also repre-sents the company in ownership matters.

Audit CommitteeThe tasks of the Audit Committee include moni-toring financial reporting and the efficiency of the company’s internal control, internal audit and risk management. The committee keeps itself informed on the audit, reviews and moni-tors the impartiality and independence of the auditors, and contributes proposals for the AGM’s election of auditors.

Remuneration CommitteeThe Remuneration Committee drafts the Board’s motions on issues relating to remunera-tion principles, remuneration and other terms and conditions of employment for the President and CEO and is authorized to make decisions in these matters for the company’s other senior executives. The committee monitors and assesses programs for variable remuneration, the application of the AGM’s resolution on guidelines for remuneration of senior executives and the applicable remuneration structure and remuneration levels in the Group.

Information regarding SCA’s ownership structure is presented on pages 18–19.

Internal auditAt SCA, it is the responsibility of all employees to ensure sound internal governance and control in the operation or process for which they are responsible. Since 2006, internal audit has been a separate function with the task of evaluating and improving the efficiency of SCA’s internal governance and control, as well as its risk man-agement. The function has 14 employees and the manager reports to the Audit Committee and the Board regarding internal audit matters and to the CFO with respect to other matters. The internal auditors are geographically located throughout the world where SCA conducts operations. The function examines, among other aspects, SCA’s internal processes for ordering, invoicing, purchasing and financial reporting, IT systems, compliance with SCA’s policies, including its Code of Conduct, HR issues and various types of projects. The function also offers internal consultancy services in connec-tion with internal control matters.

President and CEOSCA’s President and CEO is responsible for and manages the day-to-day administration of the Group and follows the Board’s guidelines and instructions. The President and CEO is sup-ported by two Executive Vice Presidents, one of whom is also the CFO, and the Corporate Senior Management Team, see pages 58–59, the work


Responsibility and governance | Corporate Governance

More detailed information at www.sca.com

• Articlesofassociation• SwedishCodeofCorporate

Governance• InformationfromAnnualGeneral

Meetings of previous years, since 2004 (notices, minutes, President’s speeches and press releases)

• InformationfromtheNominationCommittee, since 2006 (composition, proposals and work)

• Informationaheadofthe2014AnnualGeneral Meeting (notice, Nomination Committee proposals, Board’s pro-posal for principles for remuneration of the President and other senior executives, information routines for notifying attendance at the meeting, etc.)

• EarlierCorporateGovernanceReports, since 2005

of which is led by the CEO. The Corporate Senior Management Team consists of the President, the Executive Vice Presidents, Business Unit Presidents and the equivalent, and managers for the group functions Finance, Human Resources, Sustainability, Legal Affairs, Communications, and Strategy and Business Development, the latter of which is also responsible for Global Business Services (GBS) and IT Services. GBS’ global area of responsibility is providing trans-actional service, HR administrative support, office-related services and service to all units within SCA. For the hygiene business, there is also a special management body. The formal work plan for the Board of Directors and terms of reference issued by the Board of Directors to the President detail, for example, the division of work between the Board and President. In con-sultation with the Chairman of the Board, the President prepares documentation and decision data for the Board’s work.

SCA has seven business units:• SCAAfHProfessionalHygieneEurope,

which offers AfH tissue.

• SCAConsumerGoodsEurope,whichoffersconsumer goods.

• SCAIncontinenceCareEurope,whichoffersincontinence products.

• SCAAsiaPacific,whichofferstissueandpersonal care products.

• SCAAmericas,whichofferstissueand personal care products.

• SCAMEIA(theMiddleEast,IndiaandAfrica), which offers tissue and personal care products.

• SCAForestProducts,whichofferspublica-tion paper, kraftliner (packaging paper), pulp, solid-wood products and renewable energy.

In addition to the business units, SCA has estab-lished two global units:• GlobalHygieneCategory(GHC),withglobal

responsibility for customer and consumer brands and innovation in the hygiene area.

• GlobalHygieneSupply(GHS),withglobalresponsibility for purchasing, production planning, technology and investments in the hygiene segment.

SCA’s business units adhere to the principle of distinct decentralization of responsibility and authority. The business units are fully respon-sible for developing their respective operations through established objectives and strategies; a process that is also centrally coordinated. The business units are responsible for their operating result, capital and cash flow. The position of the business and results are fol-lowed up by the entire Corporate Senior Man-agement Team on a monthly basis. Each quar-ter, business review meetings are conducted where the management of each business unit personally meets the President, the CFO and others. These meetings function as a comple-ment to the daily monitoring of operations. Through formal work plans and terms of refer-ence, a number of issues of material signifi-cance are placed under the control of the CEO and the Parent Company’s Board of Directors. SCA divides up and reports its business in three business areas – Personal Care, Tissue and Forest Products.

External auditorsThe company’s auditor, elected at the Annual General Meeting, examines SCA’s annual report and consolidated financial statements, the Board’s and President’s administration and the annual reports of subsidiaries, and submits an audit report.

The audit is performed in accordance with the Swedish Companies Act, International Standards on Auditing (ISA) and generally accepted auditing principles in Sweden.

Global Hygiene Supply (GHS)

President and CEO

Executive Vice Presidents

Remuneration Committee

Group Functions: Finance, Human Resources, Sustainability, Legal Affairs, Communications, and Strategy and Business Development*

SCA Asia Pacific

SCA Americas

SCA AfH Professional

Hygiene Europe

SCA Consumer Goods

Europe

SCA MEIA

SCA Forest

Products

Annual General MeetingNomination Committee External auditors

Internal audit

Board of Directors

Chairman of the BoardAudit Committee

SCA Incontinence Care

Europe

Global Hygiene Category (GHC) Global Responsibility across geographics in the hygiene operations

Global Responsibility across geographics in the hygiene operations

Internal rules and regulations, etc.• ArticlesofAssociation• FormalworkplanoftheBoardofDirectors• TermsofreferenceissuedbytheBoardto

the President• Policydocuments(e.g.financial,commu-

nications, risk management, pension, HR) and instructions (payment authorization and payment)

• CodeofConduct

External rules and regulations, etc.• TheSwedishCompaniesAct• Swedishandinternationalaccounting

legislation• NASDAQOMXStockholm’srulesand

regulations• SwedishCodeofCorporateGovernance

* The Strategy and Business Development corporate staff function is also responsible for Global Business Services (GBS) and IT Services. GBS has global responsibility for providing transactional services, human resources support, office-related services and other services for all units in SCA.


Corporate Governance | Responsibility and governance

Annual General MeetingThe AGM was held on Wednesday, April 10, 2013, in Stockholm, Sweden. The meeting was attended by 1,208 shareholders, either person-ally or by proxy, corresponding to 67.4% of the votes in the company. Attorney-at-Law Sven Unger was elected Chairman of the Meeting.

Resolutions by the meeting• dividendofSEK4.50(4.20)persharetobe

paid for the 2012 fiscal year,• re-electionofBoardmembersPärBoman,

Rolf Börjesson, Jan Johansson, Leif Johans-son, Sverker Martin-Löf, Bert Nordberg, Anders Nyrén, Louise Julian Svanberg and Barbara Milian Thoralfsson,

• re-electionofSverkerMartin-LöfasChair-man of the Board,

• adoptionofguidelinesfordeterminingthesalary and other remuneration of the Presi-dent and other senior executives, see page 26 and Note 6 on pages 85–86.

The minutes of the meeting in full and informa-tion on the 2013 AGM, including the President’s speech, can be accessed at www.sca.com.

Nomination CommitteeThe 2012 AGM decided that the Nomination Committee should comprise representatives of not fewer than the four and not more than the six largest shareholders in terms of voting rights, as well as the Chairman of the Board, who is also the convener. The Nomination Committee shall submit proposals relating to the Chairman of the Meeting, the Board of Directors, the Chairman of

the Board, Board fees and remuneration for committee work, the election of the company’s auditor and remuneration for services rendered.

In its work, the Nomination Committee is to consider the rules that apply to the independ-ence of Board members and that the selection for those nominated shall be based on expertise and experience relevant to SCA.

Composition of the Nomination Committee for the 2014 AGM The composition of the Nomination Committee for the 2014 AGM is as follows:• Carl-OlofBy,ABIndustrivärden,Chairman

of the Nomination Committee• HåkanSandberg,HandelsbankenPension

Foundation, among others• YngveSlyngstad,NorgesBankInvestment

Management• CarolineafUgglas,Skandia• SverkerMartin-Löf,ChairmanoftheBoard

of SCA

All shareholders have had an opportunity to sub-mit proposals to the Nomination Committee. The Nomination Committee’s proposals for the 2014 Annual General Meeting are presented in the notification of the AGM on SCA’s website www.sca.com. The 2014 AGM will be held on April 10, see page 21.

The Nomination Committee was convened on two occasions. The Chairman of the Board presented the Board evaluation, which is con-ducted annually, and provided the Nomination Committee with information regarding Board and committee work during the year.

Board of DirectorsSCA’s Board of Directors comprises nine mem-bers elected by the AGM.

BoardmembersPärBoman,RolfBörjesson,Jan Johansson (SCA’s President and CEO), Leif Johansson, Sverker Martin-Löf, Bert Nordberg, Anders Nyrén, Louise Julian Svanberg and Barbara Milian Thoralfsson were re-elected to the Board. Sverker Martin-Löf was elected as Chairman of the Board.

The independence of Board members is pre-sented in the table below. SCA complies with the requirements of the Swedish Code of Corporate Governance that stipulate that not more than one member elected by the AGM shall be a member of company management, that the majority of the members elected by the AGM shall be independent of the company and com-pany management, and that not fewer than two of these shall also be independent of the com-pany’s major shareholders. All of the Board members have experience of the requirements incumbent upon a listed company. The employ-ees have appointed the following three repre-sentatives to the Board for the period until the 2017 AGM: Roger Boström, Örjan Svensson and Thomas Wiklund, and their deputies Per Anders-son, Paulina Halleröd and Hans Nyqvist.

Board activitiesIn 2013, the Board was convened nine times. The Board has a fixed formal work plan that describes in detail which ordinary agenda items are to be addressed at the various Board meet-ings of the year. Recurring agenda items are finances, the market situation, investments and

Activities during the year

Composition of the largest shareholders, Nomination Committee at August 31, 2013 (share of votes)

%

AB Industrivärden 29.2

Handelsbanken* 14.3

Norges Bank Investment Management 8.0

Skandia 1.6* Including funds and trusts.

Board of Directors and committees

Committee Attendance

Board of Directors Elected Dependence1) Audit RemunerationBoard

meetingsAudit

CommitteeRemuneration

Committee

Pär Boman 2010 n 9/9

Rolf Börjesson 2003 x 9/9 3/3

Jan Johansson 2008 n 9/9

Leif Johansson 2006 x 9/9 3/3

Sverker Martin-Löf, Chairman 1986 n x Chairman 9/9 5/5 3/3

Bert Nordberg 2012 9/9

Anders Nyrén 2001 n Chairman 9/9 5/5

Louise Julian Svanberg 2012 9/9

Barbara Milian Thoralfsson 2006 x 9/9 5/51) As defined in the Swedish Code of Corporate Governance.n = Dependent in relation to the company’s major shareholder, AB Industrivärden.n = President of SCA, dependent in relation to the company. n = Dependent in relation to the company, the Corporate Senior Management Team, and the company’s major shareholder, AB Industrivärden.



adoption of the financial statements. On a regu-lar basis throughout the year, the Board has also dealt with reports from the Audit and Remunera-tion Committees and reports on internal control and financial operations. The company’s audi-tors regularly present a report on their audit work and these issues are discussed by the Board. The Business Unit Presidents present reports on their respective operations and cur-rent issues affecting them to the Board.

Evaluation of the Board’s workThe work of the Board, like that of the President, is evaluated annually using a systematic and structured process, the purpose of which is to obtain a sound basis for the Board’s own devel-opment work and to provide the Nomination Committee with decision data for its nomination work. The Chairman of the Board is responsible for the evaluation. In 2013, the evaluation took the form of a questionnaire and discussions between the Chairman of the Board and the members. The evaluation covers such areas as the Board’s method of work, expertise and the year’s work. The Board was provided with feed-back after the results were compiled. The Nomi-nation Committee was also informed of the results of the evaluation.

Audit CommitteeIn 2013, the Audit Committee comprised Chair-man Anders Nyrén, Barbara Milian Thoralfsson and Sverker Martin-Löf. The Audit Committee held five meetings during the year. In its work, which includes monitoring financial reporting,

the committee dealt with relevant accounting issues, internal auditors’ reviews, auditing work and a review of various measurement issues, such as testing of impairment requirements for goodwill, the measurement of forest assets and the preconditions for the year’s pension liability calculations.

Remuneration CommitteeThe Remuneration Committee consists of Chair-man Sverker Martin-Löf, Leif Johansson and Rolf Börjesson. The Remuneration Committee held three meetings during the year. In addition, a number of issues were addressed by circular letter. Activities in 2013 mainly concerned remu-neration and other employment terms and con-ditions for senior executives, and current remu-neration structures and remuneration levels in the Group.

Internal auditThe basis of the work is a risk analysis con-ducted in cooperation with SCA’s management team. The risk analysis concludes in an audit plan, which is presented to the Audit Committee. In 2013, just over 120 audit projects were per-formed. During the year, the function reported its observations at each meeting with the Audit Committee.

Work in 2013 also involved following up the units’ progress with process-based control, fol-low-up and reporting on the efficiency in internal governance and control, and separate assess-ments of the internal control in countries where SCA has major investments and in joint ventures.

External auditorsThe 2013 Annual General Meeting appointed the accounting firm of PricewaterhouseCoopers AB as the company’s auditor for a mandate period of one year. The accounting firm notified the com-pany that Anders Lundin, Authorized Public Accountant, would be the senior auditor. Anders Lundin is also auditor for AB Electrolux and Telia-Sonera AB. The auditor holds no shares in SCA.

In accordance with its formal work plan, the Board met with the auditors at two scheduled Board meetings in 2013. The auditors also attended each meeting of the Audit Committee. At these meetings, the auditors presented and received opinions on the focus and scope of the planned audit and delivered verbal audit and review reports. Furthermore, at the Board’s third scheduled autumn meeting, the auditors deliv-ered an in-depth verbal report on the audit for the year. The formal work plan specifies a num-ber of mandatory issues that must be covered. These include matters of importance that have been a cause for concern or discussion during the audit, business routines and transactions where differences of opinion may exist regard-ing the choice of accounting procedures. The auditors also provide an account of consultancy work assigned to the audit firm by SCA and the audit firm’s independence in relation to the com-pany and its management. On each occasion, Board members have had an opportunity to ask the auditors questions. Certain parts of the detailed discussion on the accounts take place without representatives of company manage-ment being present.

Board and Committee meetings

Board of Directors

Audit Committee

RemunerationCommittee

jAN fEB MAR APR MAy juN jul AuG SEP OCt NOV DEC



Remuneration, Corporate Senior Management and Board of Directors

Potential maximum remuneration, breakdown Outcome, variable remunerations 2009–2013

Short-Term Incentive

Long-Term Incentive

Fixed salary

Outcome, SEKm

Outcome as a percentage of fixed salary

SEKm %

0

20

40

60

80

100

201320122011201020090

20

40

60

80

100

GuidelinesThe 2013 Annual General Meeting adopted guidelines for remuneration of senior executives that are based on a total remuneration package comprising a fixed salary, variable salary and other benefits, and a pension. These unchanged guidelines are also proposed for the 2014 AGM, see page 21 and Note 6 on pages 85–86.

Remuneration of the President and other senior executivesRemuneration of the President and other senior executives is presented in Note 6 on pages 85–86. Variable remuneration for the CEO, Executive Vice Presidents and Business Unit Presidents was maximized to a total of 100% of the fixed salary for 2013. For one Business Unit President, stationed in the US, the maximum outcome is 130%, while the corresponding limit for other senior executives is 90%.

Variable remuneration and strategic targets Programs for variable remuneration are formu-lated to support the Group’s strategic targets. The short-term program is individually adapted and based mainly on cash flow, operating profit and growth. The long-term program is based on the SCA share’s long-term total shareholder return.

Remuneration of the BoardAccording to the resolution by the AGM, the fees paid to the AGM-elected Board members totaledSEK6,280,000.SeeNote6,onpages85–86 for further information.



Internal control of the financial reporting

The Board’s responsibility for internal govern-ance and control is regulated in the Swedish Companies Act, the Annual Accounts Act and in the Swedish Code of Corporate Governance. The Annual Accounts Act requires that the com-pany, each year, describes its system for internal control and risk management with respect to financial reporting. The Board bears the overall responsibility for financial reporting and its for-mal work plan regulates the internal division of work between the Board and its committees.

The Audit Committee has an important task to prepare the Board’s work to assure the quality of financial reporting. This preparation work includes issues relating to internal control and regulation compliance, control of recognized values, estimations, assessments and other activities that may impact the quality of financial statements. The Committee has charged the company’s auditors with the task of specifically examining the degree of compliance in the com-pany with the rules for internal control, both gen-eral and detailed.

financial reporting to the BoardThe Board’s formal work plan stipulates which reports and information of a financial nature shall be submitted to the Board at each sched-uled meeting. The President ensures that the Board receives the reports required to enable the Board to continuously assess the company’s and Group’s financial position. Detailed instruc-tions specifically outline the types of reports that the Board is to receive at each meeting.

External financial reportingThe quality of external financial reporting is guaranteed via a number of actions and proce-dures. The President is responsible for ensuring that all information issued, such as press releases with financial content, presentation material for meetings with the media, owners and financial institutions, is correct and of a high quality. The responsibilities of the company’s auditors include reviewing accounting issues that are critical for the financial reporting and reporting their observations to the Audit Com-

mittee and the Board of Directors. In addition to the year-end report, the auditors also review the six-month report.

Risk managementWith regard to financial reporting, the risk that material errors may be made when reporting the company’s financial position and results is con-sidered the primary risk. To minimize this risk, control documents have been established per-taining to accounting, procedures for annual accounts and follow-up of reported annual accounts. A Group-wide system for reporting annual accounts has also been introduced. SCA’s Board of Directors and management assess the financial reporting from a risk per-spective on an ongoing basis. To provide sup-port for this assessment, the company’s income statement and balance sheet items are com-pared with earlier reports, budgets and other planned figures. Control activities that are signif-icant to financial reporting are carried out using the company’s IT system. For further informa-tion, see Risk and risk management on pages 60–65.

Control activities and follow upSignificant instructions and guidelines related to financial reporting are prepared and updated regularly by the Group’s central controller organ-ization and are easily accessible on the Group’s intranet. The central controller organization is responsible for ensuring compliance with instructions and guidelines. Process managers at various levels within SCA are responsible for carrying out the necessary control measures with respect to financial reporting. An important role is played by the business unit’s controller organizations, which are responsible for ensur-ing that financial reporting from each unit is cor-rect, complete and delivered in a timely manner. In addition, each business unit has a Finance Manager with responsibility for each business unit’s financial statements. The company’s con-trol activities are supported by the budgets pre-pared by each business unit and updated during the year through continuous forecasts.

In recent years, SCA has introduced a standard-ized system of control measures involving pro-cesses that are significant to the company’s financial reporting. The controls are adapted to the operational process and system structure of each unit. Accordingly, each unit prepares a record of the actual controls to be carried out in the unit in question. Control of these processes is assessed through self-evaluation followed up by an internal audit. In some cases, SCA has enlisted external help to validate these control measures.

Financial results are reported and examined regularly within the management teams of the operating units and communicated to SCA’s management at monthly and quarterly meet-ings. Before reports are issued, results are ana-lyzed to identify and eliminate any mistakes in the process until the year-end closing. For addi-tional information, see Internal audit on page 53.

Activities in 2013For a number of years now, the entire SCA Group has used a shared reporting system for financial statements. An increasing number of units within SCA are also introducing the same accounting system based on a common IT plat-form. In 2012, the introduction of the common accounting system began in the companies acquired from Georgia-Pacific and other com-panies acquired during the year.

Another development involved the co-loca-tion of accounting and reporting of several units in Shared Service Centers, which made report-ing more efficient and uniform. A project contin-ued in 2013 aimed at reducing the number of legal entities in SCA and thereby simplifying the reporting and system structures. In 2012, Global Business Services (GBS) was formed. GBS’ global area of responsibility is providing trans-actional service, HR administrative support, office-related services and service to all units within SCA. This gradually impacted and enhanced the efficiency of the processes during 2013 and will continue to do so in the future.



Board of Directors and Auditors

Elected by the Annual General Meeting

1 Sverker Martin-löf (1943)Tech Lic., Honorary PhDChairman of the Board since 2002. Chairman of the Board of Industri värden and SSAB. Vice Chairman of Ericsson and Handels banken. Member of the Board of Skanska.Formerly President and CEO of SCA.Elected: 1986A shares: 3,000 B shares: 77,823Independent of the company and corporate management.

2 Pär Boman (1961)Engineering and Business/Economics degreePresident, CEO and member of the Board of Handels-banken. Member of the Board of Industrivärden.Formerly Head of Handelsbanken Markets.Elected: 2010A shares: 1,000

3 Rolf Börjesson (1942)MSc Eng.Chairman of the Board of Biolight AB. Member of the Boards of Avery Dennison and Huhtamäki Oyj.Formerly President and Chairman of the Board of Rexam.Elected: 2003B shares: 25,350Independent of the company, corporate management and SCA’s major shareholders.

4 jan johansson (1954)Master of LawsPresident and CEO of SCA.Member of the Board of Handelsbanken, SSAB and the Confederation of Swedish Enterprise.Formerly President and CEO of Boliden.Elected: 2008B shares: 78,200Independent of SCA’s major shareholders.

5 leif johansson (1951)MSc Eng.Chairman of the Board of Ericsson and AstraZeneca. Chairman of the Royal Swedish Academy of Engineer-ing Sciences (IVA). Chairman of the European Round Table of Industrialists (ERT).Formerly President and CEO of Volvo.Elected: 2006B shares: 6,040Independent of the company, corporate management and SCA’s major shareholders.

6 Bert Nordberg (1956)EngineerChairman of the Board of Vestas Wind Systems A/S. Member of the Boards of AB Electrolux and BlackBerry Ltd. Formerly President of Sony Mobile Communications.Elected: 2012B shares: 5,000Independent of the company, corporate management and SCA’s major shareholders.

Information regarding individuals’ own and related parties’ shareholdings pertains to the situation on December 31, 2013.

1

4

2 3

5

6


Responsibility and governance | Board of Directors and Auditors

7 Anders Nyrén (1954)MSc Econ, MBAPresident and CEO of AB Industrivärden.Chairman of the Boards of Handelsbanken and Sandvik. Member of the Boards of Ernström & Co AB, Industri-värden, Volvo, the Stockholm School of Economics and the Stockholm School of Economics Association.Formerly Executive Vice President of Skanska.Elected: 2001B shares: 1,200Independent of the company and corporate management.

8 louise julian Svanberg (1958)MSc EconFormerly President and Chairman of the Board of EF. Elected: 2012B shares: 15,000Independent of the company, corporate management and SCA’s major shareholders.

9 Barbara Milian thoralfsson (1959)MBA, BAMember of the Boards of AB Electrolux, Telenor ASA and Norfolier GreenTec AS.Formerly President and CEO of TeliaSonera Norge.Elected: 2006Independent of the company, corporate management and SCA’s major shareholders.

Appointed by the employees

10 Roger Boström (1971)Chairman Swedish Paper Workers’ Union dept. 167 at SCA Graphic Sundsvall AB, Östrand pulp mill, Timrå. Member of the Swedish Trade Union Confederation (LO). Appointed: 2013 B shares: 25

11 Örjan Svensson (1963)Senior Industrial Safety Representative at SCA Hygiene Products AB, Edet Bruk, Lilla Edet.Member of the Swedish Trade Union Confederation (LO).Appointed: 2005B shares: 75

12 thomas Wiklund (1955)Shift Production Manager and Chairman of Ledarna (Swedish Organization for Managers) at Munksund paper mill.Member of the Council for Negotiation and Cooperation (PTK).Appointed: 2009

Deputies

Per Andersson (1955)Employed at SCA Obbola, Umeå Appointed: 2013

Paulina Halleröd (1967)Employed at SCA Hygiene Products, Gothenburg Appointed: 2013

Hans Nyqvist (1968)Employed at SCA Hygiene Products, Gothenburg Appointed: 2013

Honorary Chairman

Bo Rydin MSc Econ., Hon PhD Econ., Hon PhD Engineering

Auditors

PricewaterhouseCoopers ABSenior Auditor: Anders Lundin, Authorized Public Accountant.

Secretary to the Board

Mikael Schmidt (1960)Master of LawsSenior Vice President, Group Function Legal Affairs, General Counsel.Employed since: 1992B shares: 4,500

7

9

11

10

12

8


Board of Directors and Auditors | Responsibility and governance

1 jan johansson (1954)President and CEO Master of LawsEmployed since: 2007 B shares: 78,200

2 lennart Persson (1947)CFO and Executive Vice PresidentHead of Group Function FinanceBSc BAEmployed since: 1987B shares: 50,165

3 Mats Berencreutz (1954)Executive Vice PresidentMSc MEEmployed since: 1981 B shares: 12,000

4 joséphine Edwall-Björklund (1964)Senior Vice President, Group Function CommunicationsBSc in CommunicationsEmployed since: 2012B shares: 1,100

5 Magnus Groth (1963)President, SCA Consumer Goods Europe MBA and MSc MEEmployed since: 2011B shares: 4,800

6 Gordana landén (1964)Senior Vice President, Group Function Human ResourcesBScEmployed since: 2008 B shares: 2,742

7 ulf larsson (1962)President, SCA Forest Products BSc ForestryEmployed since: 1992 B shares: 4,400

8 William ledger (1967)President, SCA Global Hygiene SupplyBSc, Industrial Chemical EngineerEmployed since: 2002B shares: 3,050

Corporate Senior Management Team

2

4

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1

8

5

6

3


Responsibility and governance | Corporate Senior Management Team

9 Margareta lehmann (1958)President, SCA Incontinence Care EuropeBSc BAEmployed since: 1983B shares: 3,458

10 Don lewis (1961)President, SCA Americas BSc BA Employed since: 2002 SCA ADR: 8,405

11 Sune lundin (1951)President, SCA AfH Professional Hygiene EuropeMSc Eng.Employed since: 2008B shares: 12,450

12 Christoph Michalski (1966)President, SCA Global Hygiene Category MSc Econ.Employed since: 2007B shares: 16,450

Information regarding individuals’ own and related parties’ shareholdings pertains to the situation on December 31, 2013.

9

10 12 17

11

13 16

14

15

13 Mikael Schmidt (1960)Senior Vice President, Group Function Legal Affairs, General CounselMaster of LawsEmployed since: 1992B shares: 4,500

14 Robert Sjöström (1964)Senior Vice President, Group Function Strategy and Business Development, Global Business Services and IT MSc Econ., MBA Employed since: 2009B shares: 10,600

15 Kersti Strandqvist (1963)Senior Vice President, Group Function SustainabilityMSc Chem., Tech Lic.Employed since: 1997B shares: 6,797

16 ulf Söderström (1964)President, SCA Asia PacificStudies in economics, MBAEmployed since: 2009B shares: 11,500

17 thomas Wulkan (1961)President, SCA MEIA BSc BA Employed since: 2000 B shares: 7,450


Corporate Senior Management Team | Responsibility and governance

Risks and risk managementSCA is exposed to a number of risks that could exert a greater or lesser material impact on the Group. These risks are generally defined as fac-tors that impact SCA’s ability to achieve estab-lished targets for the Group. This applies to both financial targets and targets in other areas. SCA’s targets are outlined in the section Strat-egy, on pages 8–9.

Many of the risks described could have a pos-itive or negative impact on the Group. This implies that if a risk develops in a favorable manner or if risk management is successful in counteracting the risk, target fulfillment could exceed expecta-tions. From this perspective, risk could also entail opportunities for SCA. Examples include the GDP trend and the economic situation, the cost of input goods, customer and consumer patterns, and movements in market prices.

The description in this section pertains to the structure that the SCA Group had at year-end 2013.

SCA’s structure and value chainSCA’s structure and geographically dispersed business entails in itself a certain degree of risk reduction. SCA conducts operations in three business areas that deliver to entirely, or partially, different customer segments and end-users. The operations are influenced to varying degrees by

the business cycle and general economic pros-perity and their competitive situations also differ. SCA’s products are sold through many different channels and distribution paths.

The operation has a large geographical spread. Sales are conducted in about 100 coun-tries worldwide and manufacturing is pursued at about 100 production units in some 30 countries. Sales are often based on local manufacturing.

SCA’s structure also ensures that the raw material flows are, to a certain degree, inte-grated from forest land to the finished consumer products. In 2013, 53% of SCA’s wood raw material requirements were sourced from the Group’s own forests. The wood fiber is used for SCA’s production of pulp, kraftliner and publica-tion papers, in sawmill operations, and for the manufacture of tissue. Forest waste from SCA’s activities is used in biofuel operations. The energy generated in the production process is used internally or sold.

The pulp is subsequently used mainly in the production of tissue. In 2013, 31% of the pulp requirement was satisfied by the Group’s own pulp production.

Processes for risk managementSCA’s Board determines the Group’s strategic direction based on recommendations from Cor-

porate Senior Management. The responsibility for long-term and overall management of strate-gic risks follows the company’s delegation scheme, from the Board to the President, and from the President to the Business Unit Presi-dents. This implies that most operational risks are managed by SCA’s business units at a local level, but are coordinated when deemed neces-sary. The tools for this work primarily comprise continuous reporting by the business units and the annual strategy process, which includes risk and risk management as part of the process.

SCA’s financial risk management is central-ized, as is the case for the corporate internal bank for financial transactions of Group compa-nies and management of the Group’s energy risks. The financial risks are managed in accord-ance with the Group’s finance policy, which is set by SCA’s Board and, together with SCA’s energy risk policy, comprises a framework for management activities. The risks are grouped and followed up on a regular basis to ensure compliance with these guidelines. SCA has also centralized the management of other risks.

SCA has established a corporate internal audit unit, which ensures that the organization complies with the Group’s policies.

Risks that impact SCA’s ability to achieve established targets

Risk Policy/Action

GDP trend and economic conditions

SCA’s volume development is linked to the develop-ment of GDP and related factors, including industrial production, in countries representing SCA’s main markets. Movements in the GDP trend influence demand for some of SCA’s products, primarily in the Forest Products business area.

Development within SCA’s key customer segments (Europe, Index in 2000 = 100)

Index

40

60

80

100

120

1312111009080706050403020100

Retail trade Advertisingmarket(newspapers and

magazines, Germany,France and the UK)

Manufacturing industry

Construction industry

SCA has reduced the impact of the general economic trend by focusing on its hygiene business.

In 2013, Personal Care and Tissue accounted for 83% of SCA’s sales. Sales to the retail market, which accounts for the bulk of sales of hygiene products, are more dependent on established consumption patterns and distribution than the economic climate. The institu-tional care and homecare facilities segment for inconti-nence products is also relatively unaffected by the busi-ness cycle, although it can be impacted by the public budget situation in certain countries. The segment in the hygiene business that is most sensitive to economic movements is AfH tissue, which is affected by the con-sumption of tissue outside the home, for example, within industry and offices, as well as in the hotel and restaurant industry.

Forest products are vulnerable to economic move-ments. Sales of publication papers, representing 5% of SCA’s sales, are affected by fluctuations in business activity in the advertising sector. The relatively cyclical construction and private house industries impact SCA’s solid-wood product business, which accounts for 5% of sales.

For all businesses, it is important that SCA manages the effects of the economic movements that occur by taking actions to reduce costs and by reviewing the capacity and production structure.


Responsibility and governance | Risks and risk management

Risk Policy/Action

Environmental impact and climate change

SCA’s operations have an impact on air, water, land and biological processes. These effects could lead to costs for restoring the environment or other kinds of negative effects. The matter of the economic impact of climate change is also growing in signifi-cance.

A number of years ago, SCA established a sustainabil-ity policy, detailing guidelines for the Group’s actions in the areas of environmental and social responsibility. Risks are minimized through preventive work in the form of certified environmental management systems, environmental risk inspections in conjunction with acquisitions, and remediation projects in connection with plant closures.

The Group’s large forest holding has a positive environmental effect through the absorption of carbon dioxide. Furthermore, the forest guarantees access to renewable forest raw materials.

Through its extensive Resource Management System (RMS), SCA monitors how the company utilizes energy, water, transport activities and raw materials. The data is used for internal control and follow-up of established targets. SCA works proactively to decrease its carbon footprint by reducing its energy consumption and emis-sions of greenhouse gases. Continuous work is con-ducted to reduce the already low levels of oil and coal used in the Group, and to increase the proportion of renewable energy, such as wind power. A comprehen-sive description of SCA’s work and governance in this area is provided in the Group’s Sustainability Report.

Impact of political decisions

SCA is affected by political decisions and adminis-trative regulations in the approximately 100 coun-tries in which the Group conducts operations. These relate to general regulations, such as taxa-tion and financial reporting. SCA is also impacted by more specific regulations, such as the granting of permits in accordance with the Environmental Code and reimbursement of expenses in the healthcare system.

Through SCA’s Public Affairs unit, the company works to monitor and evaluate changes in its surroundings, including amended legislation, and identify actions that lead to improvements for all relevant stakeholder groups. SCA is also a member of national and interna-tional trade associations, which comprise the primary bodies for participation in current public debates.

For issues of importance to the company, SCA can also work directly in cooperation with regulatory bodies and the public. Examples include the project to con-struct wind turbines on SCA’s land in Sweden.

A key area for SCA is global energy and environmen-tal legislation. Because SCA has major operations in Europe and the EU plays a leading role in developing environmental legislation, SCA is focusing its activities on the various EU institutions. For example, SCA moni-

tors developments in policy areas of major importance to the company, including resource consumption in general and issues of water, air and waste, such as EU trade in emission rights, the EU Waste Directive and the issue of the use of sulfurous fuels in shipping.

Since the public sector is both a significant customer and stakeholder group for SCA, the health debate is important to the company, especially with regard to the development of systems for healthcare with greater patient benefit and greater cost efficiency. SCA also works actively to disseminate knowledge regarding var-ious national systems to decision-makers in countries where new structures are being built up. Examples include the development of systems for cost-free pre-scription of incontinence aids in countries where such benefits were not offered in the past.

Impact of substitutes

Other product solutions (substitutes) can replace products that are included in SCA’s offering and thereby reduce sales. By offering competitive prod-ucts, SCA can also take market shares from the substitute. The issue of substitutes is also linked to changes in the patterns and attitudes of customers and consumers that affect demand for certain products and thus profitability.

Substitutes exist for virtually all SCA products. This may involve different products with a similar function, such as cloth diapers, cloth rags for household or industrial cleaning, or completely different solutions to the needs of customers and consumers, such as electric hand dryers and the spread of news by electronic media instead of on paper.

SCA takes proactive steps to adapt to the existence of substitutes and take advantage of the possibilities to expand the Group’s business by viewing the substi-tutes as a potential market opportunity. Another way of being proactive is through innovation, including in-house research and development. A major driver for innovation comprises demands and requests from cus-tomers and consumers.

Accordingly, development work is often conducted in direct cooperation with customers. An increasingly important factor is greater focus on sustainability with respect to environmental, financial and social factors. Other demands imposed on SCA’s innovation include the desire to create profitable differentiation for SCA’s product range and create value and growth, both for customers and SCA (read more about innovation on page 12).

In many countries, the degree of penetration is low, meaning only a small proportion of the population uses SCA’s products, compared with more developed coun-tries. To increase acceptance of its products, SCA focuses on matters influencing attitudes and on breaking taboos. This also applies to Europe and North America with regard to such items as incontinence products.

Dependence on major customers and distributors

The retail trade is SCA’s single largest customer group and thus exercises considerable influence. Approximately half of SCA’s sales are made to the retail trade, under both SCA’s brands and the retailer’s own brands. SCA also uses other distribu-tors or retailers that could impact the Group. A gen-eral consolidation process is taking place in several of SCA’s sales channels, thus increasing depend-ence on individual customers. This increase in dependence could result in negative conse-quences if SCA does not fulfil the demands imposed.

SCA’s customer structure is relatively dispersed, with customers in many different areas of business. In the retail trade, the prevailing trend is towards increased concentration, which has mainly resulted in fewer retail companies at a national and regional level. This could also present opportunities through closer cooperation. There are still a considerable number of retail compa-nies, which reduces the risk for SCA. SCA also uses distributors, mainly for AfH tissue. A very large number of distributors are active in this segment and the inter-national concentration is relatively low.

In 2013, SCA’s ten largest customers accounted for 23% of the Group’s sales. The single largest customer accounted for 3% of sales. Most of these customers were retail companies. The ten largest customers also include some large distributors of AfH tissue.

Credit risk in accounts receivable is dealt with in the section Credit risk, on page 65.


Risks and risk management | Responsibility and governance

Risk Policy/Action

Expansion into new markets

In recent years, SCA has expanded its operations into emerging markets outside Western Europe and North America. If the conditions differ from those in already established markets, this expansion could involve new risks for SCA.

Sales in emerging markets

Emerging markets include the countries in Eastern Europe, Latin America, Asia (excluding Japan) and Africa.

9% 23 %

2003 2013

Mature markets

Emerging markets

SCA can expand its business in various ways. The sale of SCA’s products in new markets can be managed by agents or by the Group’s own sales company. When a decision has been made to conduct manufacturing in the local market, this may be carried out through a joint venture in cooperation with other owners or by SCA acquiring or forming a wholly owned company. A joint venture, through collaboration with a partner with solid local knowledge, reduces the risk for SCA.

Prior to initiating operations, SCA conducts a feasi-bility study. Depending on how the business will be operated, varying methods are used in the feasibility study, including market studies, and a review of the legal requirements, including environmental legislation, due diligence of existing companies, and assessments of the business climate and common business prac-tices in the market in question. A risk analysis of issues related to the environment and business ethics is also performed.

When the business is operational, SCA has often improved its knowledge of the market and can thus adapt the organization. The recruitment of personnel with the appropriate values is crucial, as is maintaining contact with the market in question through communi-cation. SCA’s Group policies, including its Code of Conduct and Sustainability Policy, apply to all markets in which SCA conducts operations.

Movements in the market price of SCA’s products

Movements in the market price of SCA’s products could create major fluctuations in the profitability of the product in question when these movements are not linked to changes in costs for SCA.

Several methods can be applied to address this risk. Long-term contracts at fixed prices and price hedging only occur in exceptional cases. To reduce the impact of price movements on SCA, actions are taken to adapt the cost scenario to lower market prices, for example, by renegotiating purchasing agreements, implementing personnel and capacity reductions, and reviewing the business structure. In other cases, the product’s con-tent can be adapted to the new market price level.

Movements in the market price in a number of SCA’s product segments are detailed in the figure below. The diagram specifies the average price per year (Index 100) and movements around this value over the past ten years.

Highest/lowest market prices (annual average) 2003–2013 per product

Index

80

90

100

110

120

130

Solid-wood products (Pine) Average pricefor the periodPublication papers (LWC)

Kraftliner

Tissue

Risks at plants

SCA has around 100 production facilities in some 30 countries and many of these conduct continu-ous production. Fires, machinery breakdowns and other types of harmful incidents could damage the plant in question and also cause delivery problems.

SCA’s activities in this area are governed by its Risk Management Policy, which controls how SCA shall manage insurable risks. From this perspective, the aim of risk management is to effectively and cost efficiently protect employees, the environment, the company assets and the business, and to minimize SCA’s risk management costs. This can be achieved by creating and retaining a balance between loss prevention and insurance coverage.

The loss-prevention work is conducted in accord-ance with established guidelines that include inspec-tions by risk engineers and benchmarking with other plants, within and outside SCA. Other important ele-ments of loss-prevention activities include maintenance

of plants, staff training, good orderliness, and docu-mentation. Every year, SCA invests in loss-prevention measures and its production plants continuously work to reduce their risks. For example, new facilities are fit-ted with sprinkler systems as standard. All wholly owned plants are insured to replacement cost and for the loss of contribution margin. Within the EU, insur-ance is carried out by one of the Group’s own compa-nies, with external reinsurance for major damages. Out-side the EU, SCA cooperates with market-leading insurance companies.

Occurrence of unethical business practices

SCA works in some 100 countries and in environ-ments where unethical business practices may exist. If SCA becomes involved in these business practices, the company’s reputation in the market may be dam-aged. SCA may also suffer fines and other legal sanc-tions.

To ensure that SCA’s organization lives up to the com-pany’s core values and is not drawn into unethical busi-ness practices, there has been a Code of Conduct established since 2004, which includes general rules for the company’s business methods. SCA uses a num-ber of methods to monitor and safeguard the imple-

mentation of the Code. These include due diligence in connection with acquisitions, monitoring of the supplier chain and regular audits of SCA’s units around the world. More detailed information on the Code of Con-duct and the work in 2013 is available on pages 44–46 in the Group’s Sustainability Report.



Risk Policy/Action

Suppliers

SCA is dependent on a large number of suppliers. The loss of key suppliers could result in costs for SCA and problems in manufacturing. Suppliers could also cause problems for SCA through non-compliance with applicable legislation and regula-tions or by otherwise acting in an unethical manner.

To reduce this risk, SCA has supply contracts with sev-eral suppliers and continuously enters into agreements with various durations. The Group has a number of suppliers for essentially all important input goods. These contracts ensure deliveries of a significant pro-portion of input goods at the same time as the effects of sudden cost increases are limited. The Group also has more intensive cooperation with selected suppliers that covers the development of materials and processes.

SCA continuously assesses all key suppliers to ensure that they fully comply with the Group require-ments in all respects. The assessment may take the

form of a questionnaire, an on-site visit or the use of independent auditors. For essentially all important input goods, SCA assesses the following factors at current and potential suppliers:• Quality• Product safety• Impact on the environment, including the issue of the

origin of the input goods • Use of chemicals• Compliance with SCA’s Code of Conduct

Cost of input goods

The market price of many of the input goods used in the manufacture of SCA’s products fluctuates over time and this could influence SCA’s earnings.

Highest/lowest market prices (annual average) 2003–2013 per product

Index

0

25

50

75

100

125

150

175

Pulp (NBSK, USD) Average pricefor the periodRecovered paper (ONP/OMG)

Electricity (Nordpool)

The risk of price movements related to input goods and the impact of these on earnings can be managed in several ways. As a result of SCA’s structure, a signifi-cant share of raw materials is produced within the Group and, consequently, price movements have a smaller impact on earnings. In 2013, 53% of SCA’s wood raw material requirements were sourced from its own forests and 31% of its pulp requirements were satisfied by the Group’s own pulp production.

Another method used to manage the price risk is by availing of financial hedges and long-term contracts. SCA is an energy-intensive company and hedges the energy price risk for electricity and natural gas. More detailed information on the energy price risk and man-agement activities related to this is presented on page 64. Under normal circumstances, no other price risks related to input goods are hedged, although this could be carried out in exceptional cases. SCA has also begun building up its own energy operations based on the utili-

zation of the Group’s own holdings of forest land. More information on these operations is provided in the Group’s Sustainability Report.

A significant cost item comprises oil-based materials and other oil-related costs, such as transportation. The oil-based materials are principally used in Personal Care products and generally as packaging material. When possible, these and other costs are managed principally through compensation in the form of raised prices for SCA’s products, by adjusting product specifications or through streamlining of the Group’s own operation. The impact of price movements on input goods can be delayed through purchasing agreements.

SCA’s relative costs for various key input goods are described on page 114. The price trend for a number of input goods is presented in the diagram to the left.

Employee-related risks

SCA must have access to skilled and motivated employees and safeguard the availability of compe-tent managers to achieve established strategic and operational objectives.

SCA’s strategic manpower planning secures access to people with the right expertise at the right time. Recruit-ment can take place both externally and internally, and internal recruitment and job rotation are facilitated by a “job portal”, where available positions are advertised both internally and externally. Salaries and other condi-

tions are to be adapted to the market and linked to SCA’s business priorities. An established succession planning program protects operations. SCA strives to maintain good relationships with union organizations.

Legal risks

New legislation in various countries could negatively impact SCA. Legal processes can be protracted and costly.

SCA monitors the development of legislation through its internal corporate legal staff and external advisors. Another important issue is the management of SCA’s intellectual property rights (patents, trademarks, etc.), which is largely centralized. In the approximately 100

countries in which SCA conducts operations, local legal issues and disputes are handled through an extensive network of local legal advisors.

IT risks

SCA relies on IT systems in its day-to-day opera-tions. Disruptions or faults in critical systems have a direct impact on production. Errors in the handling of financial systems can affect the company’s reporting of results.

SCA has established a management system for infor-mation security, including quality assurance proce-dures that govern IT operations. Information security is monitored through continuous reviews. Standardized processes are in place for the implementation of new systems, changes to existing systems and daily opera-

tions. The majority of SCA’s system landscape is based on well-proven products, such as SAP.



Risk Policy/Action

Energy price risk

Energy price risk is the risk that increased energy prices could adversely impact SCA’s operating profit. SCA is exposed to price movements of elec-tricity and natural gas, but the price of other energy commodities also directly and indirectly impacts SCA’s operating profit.

SCA centrally manages the energy price risk related to electricity and natural gas. According to SCA’s policy, these price risks can be hedged for a period of up to 36 months. Energy price hedging is effected through financial instruments and fixed pricing in existing supply agreements.

SCA safeguards the supply of electricity and natural gas through centrally negotiated supply agreements with well-established suppliers. The portfolio of supply agreements shall be effectively spread to minimize SCA’s counterparty risk.

In 2013, SCA purchased about 7 TWh (7; 7) of elec-tricity and about 8 TWh (8; 9) of natural gas.

The graph to the right displays SCA’s price hedges in relation to forecast consumption of electricity and natu-ral gas for the next three years. The graph includes financial hedges and hedging effected via supply agreements. Some of the Swedish electricity exposure is hedged for a longer period through supply agree-ments maturing in 2019.

For further information concerning financial price hedges, see Note 18 Derivatives on page 96.

Energy price hedges in relation to forecast consumption, December 31, 2013

Electricity

Natural gas

%

0

10

20

30

40

50

60

201620152014

Currency risk

transaction exposureTransaction exposure is the risk that exchange rate movements in export revenues and import expenses could negatively impact the Group’s operating profit and the cost of non-current assets.

translation exposureTranslation exposure is the risk to which SCA is exposed when translating foreign subsidiaries’ bal-ance sheets and income statements to SEK.

long-term currency sensitivityThe table below presents a breakdown of the Group’s net sales and operating expenses by cur-rency, which provides an overview of the Group’s long-term currency sensitivity. The largest expo-sures are denominated in SEK, EUR, GBP and USD. The imbalance between sales and expenses in SEK is because the Swedish operations have a high proportion of exports that are invoiced in for-eign currencies.

CurrencySales

%Costs

%

Operating profit1) SEKm

Closing rate December

31, 2013Average

rate 2013

EUR 48 42 9,850 8.9337 8.6470

USD 13 17 –1,468 6.5024 6.5108

GBP 10 5 4,397 10.7225 10.1857

SEK 6 18 –9,314

RUB 3 4 459 0.1986 0.2046

MXN 3 3 490 0.4976 0.5106

COP 2 2 243 0.0034 0.0035

NOK 2 0 1,186 1.0576 1.1093

Other 13 9 4,091

total 100 100 9,9341) Operating profit, excluding items affecting comparability.

transaction exposureTransaction exposure, resulting from exports and imports, can be hedged for a period of up to 18 months. Contracted future payments for non-current assets in foreign currencies can be hedged up to the full cost.

The forecast net flow of currency against SEK amounts to SEK 9,153m (9,024; 10,544) on an annual basis. The forecast flows are expected to occur evenly over time. At year-end, a net flow against SEK corre-sponding to four months of the forecast flow for 2014 was hedged. The majority of hedges mature during the first and second quarters of 2014.

The forecast and hedges of the 2014 flows are shown in the table to the right.

For further information relating to hedging of trans-action exposure, see Note 18 Derivatives on page 96.

forecast and hedges relating to flows in 20141)

CurrencyNet flows

SEKm

Currency inflows SEKm

Currency outflows

SEKm

Hedged inflows

%

Hedged outflows

%

GBP 2,923 3,524 –601 21 2

RUB 1,259 1,313 –54 3 0

EUR 1,239 14,578 –13,339 9 1

NOK 1,052 1,094 –42 15 0

CHF 751 754 –3 12 0

DKK 715 788 –73 39 25

PLN 575 1,791 –1,216 2 0

JPY 476 476 0 11 0

Other 2,380 5,170 –2,790 2 0

USD –2,217 5,408 –7,625 1 8

SEK –9,153 7,782 –16,935 0 121) Excluding Vinda.

translation exposureThe policy relating to translation exposure for foreign net assets is to hedge a sufficient proportion in relation to SEK so that the Group’s debt/equity ratio is unaf-fected by exchange rate movements. Hedging takes place by financing a certain portion of capital employed in foreign currencies with loans and derivatives in corre-sponding currencies. The optimal degree of matching in connection with hedging depends on the current consolidated debt/equity ratio. Translation exposure in the income statements of foreign subsidiaries is not currency-hedged.

At December 31, 2013, capital employed in foreign currency amounted to SEK 63,254m (54,468; 62,293). Distribution by currency is shown in the table to the right. At year-end, capital employed was financed in the amount of SEK 18,733m (16,468; 23,572) in foreign cur-rency, which is equivalent to a total matching ratio of 30% (30; 38).

For further information relating to hedging of transla-tion exposure, see Note 18 Derivatives on page 96.

financing of capital employed

Capital employed

SEKmNet debt

SEKm

Matching financing

Currency2013

%2012

%

EUR 27,581 7,299 26 33

USD 6,067 3,716 61 28

GBP 4,894 2,026 41 26

MXN 4,730 1,540 33 41

RUB 2,827 1,357 48 47

COP 1,370 285 21 26

TWD 1,222 300 25 14

Other 5,028 355 7 3

total 53,719 16,878

Vinda 9,535 1,855

total currencies 63,254 18,733 30 30

SEK 36,936 15,153

total 100,190 33,886



Risk Policy/Action

Credit risk

Credit risk refers to the risk of losses due to a failure to meet payment obligations by SCA’s counterpar-ties in financial agreements or by customers.

Credit risk in accounts receivableCredit risk in accounts receivable is managed through credit checks of customers using credit rating compa-nies. The credit limit is set and regularly monitored. Accounts receivable are recognized at the amount that is expected to be paid based on an individual assess-ment of each customer.

financial credit riskThe objective is that counterparties must have a mini-mum credit rating of A– from at least two of the rating institutes Moody’s, Fitch and Standard & Poor’s.

SCA strives to enter into agreements that allow net calculation of receivables and liabilities. Credit expo-sure in derivative instruments is calculated as the mar-ket value of the instrument. At year-end, the total credit exposure was SEK 9,807m (9,321; 9,739). This expo-sure also includes credit risk for financial investments in the amount of SEK 9,281m (8,376; 7,487), of which SEK 6,287m (6,354; 6,167) was attributable to leasing trans-actions (see Note 33 Contingent liabilities).

Credit exposure in derivative instruments amounted to SEK 526m (945; 820) at December 31, 2013.

ten largest customers’ share of outstanding accounts receivable by business area

%

0

5

10

15

20

25

30

Personal Care and Tissue

Forest Products

Liquidity and refinancing risk

Liquidity and refinancing risk is the risk that SCA is unable to meet its payment obligations as a result of insufficient liquidity or difficulty in raising new loans.

SCA is to maintain financial flexibility in the form of a liquidity reserve consisting of cash and cash equiva-lents and unutilized credit facilities totaling at least 10% of the Group’s forecasted annual sales. SCA limits its refinancing risk by having a good distribution for the maturity profile of its gross debt. The gross debt must have an average maturity in excess of three years, con-sidering unutilized credit facilities that are not liquidity reserves. Surplus liquidity should primarily be used to amortize external liabilities. SCA’s policy is to not agree to terms that entitle the lender to withdraw loans or adjust interest rates as a direct consequence of move-ments in SCA’s financial key figures or credit rating.

The Group’s financing is mainly secured by bank loans, bond issues and through issuance of commer-cial papers. The refinancing risk in short-term borrow-ing is limited through long-term credit facilities from bank syndicates and individual banks with favorable creditworthiness.

SCA’s net debt increased by SEK 959m in 2013. At year-end, the average maturity of gross debt was 2.8 years (2.3; 2.9). If short-term loans were replaced with drawings under long-term unutilized credit facilities, the maturity would amount to 3.5 years. Unutilized credit facilities amounted to SEK 18,186m at year-end. In addition, cash and cash equivalents totaled SEK 3,649m. For further information, see Note 22 Current financial assets, cash and cash equivalents, and Note 25 Financial liabilities.

liquidity reserve

SEKm 2013 2012 2011

Unutilized credit facilities 18,186 17,531 21,016

Cash and cash equiva-lents 3,649 2,017 2,752

total 21,835 19,548 23,768

Interest rate risk

Interest rate risk relates to the risk that movements in the interest rates could have a negative impact on SCA. SCA is affected by interest rate movements through its net financial income and expense.

SCA seeks to achieve a good spread of its interest due dates to avoid large volumes of renewals occurring at the same time. SCA’s policy is to raise loans with float-ing rates, since it is SCA’s understanding that this leads to lower interest expense over time. The interest rate risk and interest period are measured by currency and the average interest term shall be within the interval 3–36 months.

In 2013, SCA’s net financial items decreased as a result of lower interest rates and a lower average net debt. SCA’s largest funding currencies are denominated in SEK and EUR; refer to the graph. To achieve the desired fixed interest period and currency balance, SCA uses financial derivatives. The average interest period for the gross debt, including derivatives, was 9.8 months (5.5; 6.2) at year-end, excluding Vinda. The average inter-est rate for the total outstanding net debt including deriv-atives, amounted to 2.92% (3.10; 4.14) at year-end, excluding Vinda.

Gross debt distributed by currency1)

Gross debt

SEKm

0

5,000

10,000

15,000

20,000

OtherCLPTWDCOPRUBMXNGBPUSDEURSEK

1) Excluding Vinda.



Financial statementsContentsConsolidated income statement ...................................................................... 67

Consolidated statement of comprehensive income .................................... 67

Consolidated statement of changes in equity .............................................. 68

Consolidated operating cash flow statement, supplementary disclosure ................................................................................. 68

Consolidated cash flow statement .................................................................. 69

Correlation between consolidated cash flow statement and operating cash flow statement, supplementary disclosure ............... 70

Consolidated balance sheet .............................................................................. 71

Financial statements, Parent Company .......................................................... 72

Notes

Note 1 Accounting principles ....................................................................... 74

Group

Note 2 Key assessments and assumptions ............................................. 78

Note 3 Acquisitions and divestments ....................................................... 79

Note 4 Operating expenses by type of costs ........................................... 81

Note 5 Segment reporting ........................................................................... 82

Note 6 Personnel and Board costs ............................................................ 85

Note 7 Depreciation/amortization and impairment of property, plant and equipment, and intangible assets ............................... 87

Note 8 Financial income and expenses ..................................................... 87

Note 9 Income taxes ..................................................................................... 88

Note 10 Intangible assets ............................................................................... 89

Note 11 Property, plant and equipment ..................................................... 90

Note 12 Biological assets ................................................................................ 91

Note 13 Holdings in associates and joint ventures recognized in accordance with the equity method ........................................ 92

Note 14 Shares and participations .............................................................. 92

Note 15 Joint ventures .................................................................................... 93

Note 16 List of major subsidiaries, joint ventures and associates ....... 94

Note 17 Non-current financial assets ......................................................... 95

Note 18 Derivatives .......................................................................................... 96

Note 19 Inventories ........................................................................................... 97

Note 20 Trade receivables ............................................................................... 97

Note 21 Other current receivables ................................................................ 97

Note 22 Current financial assets, cash and cash equivalents ............... 97

Note 23 Non-current assets held for sale .................................................... 97

Note 24 Equity ................................................................................................... 98

Note 25 Financial liabilities .......................................................................... 100

Note 26 Provisions for pensions ................................................................. 101

Note 27 Other provisions .............................................................................. 103

Note 28 Other non-current liabilities ......................................................... 103

Note 29 Other current liabilities .................................................................. 103

Note 30 Liquidity risk ..................................................................................... 103

Note 31 Financial instruments by category ............................................. 104

Note 32 Offsetting of financial assets and liabilities .............................. 105

Note 33 Contingent liabilities ...................................................................... 105

Note 34 Pledged assets ................................................................................ 106

Parent Company

Note 35 Operating loss ................................................................................. 106

Note 36 Personnel and Board costs ........................................................... 106

Note 37 Depreciation/amortization of tangible and intangible fixed assets ................................................................... 107

Note 38 Financial items ................................................................................. 107

Note 39 Appropriations and untaxed reserves ....................................... 107

Note 40 Income taxes ................................................................................... 107

Note 41 Intangible fixed assets ................................................................... 107

Note 42 Tangible fixed assets ..................................................................... 107

Note 43 Participations ................................................................................... 108

Note 44 Receivables from and liabilities to subsidiaries ...................... 108

Note 45 Other current receivables ............................................................. 108

Note 46 Equity ................................................................................................. 108

Note 47 Provisions for pensions ................................................................. 109

Note 48 Non-current interest-bearing liabilities ..................................... 109

Note 49 Other current liabilities .................................................................. 109

Note 50 Contingent liabilities ...................................................................... 109

Note 51 Pledged assets ................................................................................ 109

Note 52 Financial instruments by category ............................................. 109

Note 53 Adoption of the annual accounts ................................................ 109

Proposed disposition of earnings .................................................................. 110

Audit report .......................................................................................................... 111

Consolidated income statement2013 2012 2011

Group Note SEKm EURm1) SEKm EURm1) SEKm EURm1)

Net sales 5 89,019 10,295 85,408 9,815 81,337 9,013

Cost of goods sold 4 –67,006 –7,749 –64,449 –7,406 –61,701 –6,837

Gross profit 22,013 2,546 20,959 2,409 19,636 2,176

Sales and administration expenses etc. 4 –12,285 –1,421 –12,472 –1,433 –11,981 –1,328

Items affecting comparability 4 –1,251 –145 –2,634 –303 –5,439 –603

Share of profits of associates 206 24 159 18 83 10

Operating profit 8,683 1,004 6,012 691 2,299 255

Financial income 8 120 14 91 10 129 14

Financial expenses 8 –1,120 –130 –1,355 –155 –1,454 –161

Profit before tax 7,683 888 4,748 546 974 108

Tax 9 –2,119 –245 –251 –29 –1,267 –140

Profit/loss for the year from continuing operations 5,564 643 4,497 517 –293 –32

Profit from disposal group held for sale2) – – 503 58 900 100

Profit for the year 5,564 643 5,000 575 607 68

Earnings attributable to:

Owners of the Parent 5,547 641 4,956 570 548 61

Non-controlling interests 17 2 44 5 59 7

Earnings per share

Earnings per share, SEK – owners of the Parent

before dilution effects 7.90 7.06 0.78

after dilution effects 7.90 7.06 0.78

Earnings per share, SEK – owners of the Parent excluding divested operations

before dilution effects 7.90 6.34 –0.50

after dilution effects 7.90 6.34 –0.50

Dividend per share, SEK 4.753) 4.50 4.20

Profit for the year attributable to owners of the Parent 5,547 641 4,956 570 548 61

Average number of shares before dilution, million 702.3 702.3 702.3

Average number of shares after dilution, million 702.3 702.3 702.31) An average exchange rate of 8.65 (8.70; 9.02) was applied in trans-

lation to EUR.2) The packaging operations divested on June 30, 2012 are recog-

nized net on the line Profit from disposal group held for sale.3) Board proposal.

Consolidated statement of comprehensive incomeSEKm 2013 2012 2011

Profit for the year 5,564 5,000 607

Other comprehensive income for the year

Items that cannot be transferred to profit for the period

Actuarial gains and losses relating to defined benefit pension plans 1,974 –2,011 –3,512

Income tax attributable to components in other comprehensive income –500 479 905

1,474 –1,532 –2,607

Items that have been or can be transferred to profit for the period

Available-for-sale financial assets:

Result from measurement at fair value recognized in equity 249 286 –352

Transferred to profit or loss upon sale – – –

Cash flow hedges:

Result from remeasurement of derivatives recognized in equity –123 –33 –172

Transferred to profit or loss for the period 49 –2 –308

Transferred to cost of hedged investments 26 13 19

Translation differences in foreign operations 845 –2,984 –684

Result from hedging of net investments in foreign operations –423 1,134 –252

Income tax attributable to components in other comprehensive income –1311) 1 118

492 –1,585 –1,631

Other comprehensive income for the year, net after tax 1,966 –3,117 –4,238

Total comprehensive income for the year 7,530 1,883 –3,631

Total comprehensive income attributable to:

Owners of the Parent 7,396 1,908 –3,690

Non-controlling interests 134 –25 59

By business area Net sales Operating profit/loss 2)

SEKm 2013 2012 20113) 2013 2012 20113)

Personal Care 26,914 26,294 24,775 3,201 3,180 2,645

Tissue 46,987 42,375 39,118 5,595 4,640 3,150

Forest Products 15,525 18,283 20,003 1,843 1,363 2,423

Other 125 1,268 1,881 –705 –537 –480

Intra-Group deliveries –532 –2,812 –4,440 – – –

Total 89,019 85,408 81,337 9,934 8,646 7,7381) Of which, adjustment of preceding year in the negative amount of SEK 249m.2) Excluding items affecting comparability.

3) Retroactive adjustment for Forest Products due to the inclusion of two kraftiner mills after the divestment of the packaging operations on June 30, 2012.


Group | Financial statements

Consolidated statement of changes in equitySEKm 2013 2012 2011

Attributable to owners of the Parent

Opening balance, January 1 59,706 60,752 67,255

Total comprehensive income for the year 7,396 1,908 –3,690

Dividend –3,161 –2,950 –2,809

Acquisition of non-controlling interests –666 – –

Remeasurement effect upon acquisition of non-controlling interests –4 –4 –4

Closing balance 63,271 59,706 60,752

Non-controlling interests

Opening balance, January 1 458 539 566

Total comprehensive income for the year 134 –25 59

Dividend –41 –49 –89

Change in Group composition 2,482 –7 3

Closing balance 3,033 458 539

Total equity, closing balance 66,304 60,164 61,291

For further information, see Note 24 Equity.

Consolidated operating cash flow statement, supplementary disclosure

2013 2012 2011

Group SEKm EURm1) SEKm EURm1) SEKm EURm1)

Net sales 89,019 10,295 85,408 9,815 81,337 9,013

Operating expenses –74,361 –8,600 –71,995 –8,273 –68,770 –7,620

Operating surplus 14,658 1,695 13,413 1,542 12,567 1,393

Adjustment for non-cash items –1,166 –135 –789 –91 –585 –65

Operating cash surplus 13,492 1,560 12,624 1,451 11,982 1,328

Change in

Inventories 133 15 561 64 –500 –55

Operating receivables 123 14 1,411 162 –567 –63

Operating liabilities –540 –62 –813 –93 402 44

Change in working capital –284 –33 1,159 133 –665 –74

Current capital expenditures, net –3,427 –396 –3,161 –363 –3,250 –360

Restructuring costs, etc. –1,292 –149 –978 –113 –649 –72

Operating cash flow 8,489 982 9,644 1,108 7,418 822

Financial items –1,000 –116 –1,264 –145 –1,325 –147

Income taxes paid –1,634 –189 –1,193 –137 –850 –94

Other 134 15 84 9 63 7

Cash flow from current operations 5,989 692 7,271 835 5,306 588

Strategic capital expenditures and divestments

Acquisitions –5,466 –632 –14,872 –1,709 –983 –109

Strategic capital expenditures in non-current assets –1,868 –216 –1,863 –214 –1,637 –181

Total strategic capital expenditures –7,334 –848 –16,735 –1,923 –2,620 –290

Divestments 1,716 199 17,682 2,032 –15 –2

Cash flow from capital expenditures and divestments –5,618 –649 947 109 –2,635 –292

Cash flow before dividend 371 43 8,218 944 2,671 296

Dividend to shareholders –3,202 –370 –2,997 –344 –2,896 –321

Cash flow after dividend –2,831 –327 5,221 600 –225 –25

Net cash flow from disposal group2) – – 468 54 1,109 123

Net cash flow –2,831 –327 5,689 654 884 98

Net debt2013 2012 2011

SEKm EURm SEKm EURm SEKm3) EURm3)

Net debt, January 1 –32,927 –3,825 –36,648 –4,100 –34,406 –3,825

Net cash flow –2,831 –327 5,689 654 884 98

Remeasurements to equity 2,223 257 –1,847 –212 –3,505 –388

Exchange rate effects, etc. –165 124 –121 –167 379 15

Effect of reclassification of operating liability to net debt4) –186 –22 – – – –

Net debt, December 31 –33,886 –3,793 –32,927 –3,825 –36,648 –4,1001) An average exchange rate of 8.65 (8.70; 9.02) was applied in translation to EUR.2) Operating cash flow in Disposal group divested on June 30, 2012 is recognized on one line as of 2012, with retroactive adjustment for 2011.3) Including net debt from the packaging operations divested on June 30, 2012.4) Provision for payroll tax was reclassified to net debt in accordance with IAS 19.


Financial statements | Group

Consolidated cash flow statement 2013 20121) 20111)

Group SEKm EURm2) SEKm EURm2) SEKm EURm2)

Operating activities

Profit before tax 7,683 860 5,427 624 2,258 250

Adjustment for non-cash items3) 3,665 410 6,130 704 10,093 1,118

11,348 1,270 11,557 1,328 12,351 1,368

Paid tax –1,634 –183 –1,303 –150 –961 –106

Cash flow from operating activities before changes in working capital 9,714 1,087 10,254 1,178 11,390 1,262

Cash flow from changes in working capital

Change in inventories 133 15 495 57 –562 –62

Change in operating receivables 123 14 –607 –70 –894 –99

Change in operating liabilities –540 –60 1,059 122 211 23

Cash flow from operating activities 9,430 1,056 11,201 1,287 10,145 1,124

Investing activities

Acquisition of operations4) –1,976 –221 –14,144 –1,626 –932 –103

Divested operations5) 1,371 153 17,068 1,962 109 12

Investments in property, plant and equipment and intangible assets6) –5,550 –621 –5,673 –652 –5,911 –655

Sale of property, plant and equipment 255 28 359 41 265 29

Loans granted to external parties – – –1,081 –124 –179 –20

Repayment of loans to external parties 390 44 – – – –

Cash flow from investing activities –5,510 –617 –3,471 –399 –6,648 –737

Financing activities

Acquisition of non-controlling interests –1,028 –115 – – – –

Loans raised 1,955 219 – – 294 33

Amortization of debt – – –5,421 –623 – –

Dividend paid7) –3,202 –359 –2,999 –344 –2,898 –321

Cash flow from financing activities –2,275 –255 –8,420 –967 –2,604 –288

Cash flow for the year 1,645 184 –690 –79 893 99

Cash and cash equivalents at the beginning of the year 2,017 234 2,752 308 1,866 207

Exchange differences in cash and cash equivalents –13 4 –45 5 –7 2

Cash and cash equivalents at the end of the year8) 3,649 422 2,017 234 2,752 308

1) Of which packaging operations divested on June 30, 2012, SEKm 2013 2012 2011Operating activitiesProfit before tax – 679 1,284Adjustment for non-cash items – 408 981

– 1,087 2,265Paid tax – –110 –111Cash flow from operating activities before changes in working capital – 977 2,154Change in working capital – –213 –580Cash flow from operating activities – 764 1,574Cash flow from investing activities – –321 –678Dividend – –2 –2Other cash flow from financing activities – –39 –521Cash flow from financing activities – –41 –523Cash flow for the year – 402 373

2) An average exchange rate of 8.65 (8.70; 9.02) was applied in translation to EUR.

3) Adjustment for non-cash items, SEKm 2013 2012 2011Depreciation/amortization and impairment of non-current assets 5,153 6,058 11,235Fair-value measurement of forest assets –574 –643 –623Gains on asset sales and swaps –585 –149 –17Gain on divestments 156 851 25Unpaid relating to efficiency program 661 479 15Payments relating to efficiency program already recognized –509 –382 –408Revaluation of previous share upon acquisition of Vinda –564 – –Other –73 –84 –134Total 3,665 6,130 10,093

4) Acquisition of operations, SEKm 2013 2012 2011Intangible assets 2,901 3,077 100Non-current assets 4,420 7,357 720Operating assets 2,478 4,987 125Cash and cash equivalents 654 941 11Provisions and other non-current liabilities –732 –1,447 –27Net debt excl. cash and cash equivalents –2,462 –728 –51Operating liabilities –1,432 –3,263 –90Non-current assets held for sale – 911 –Fair value of net assets 5,827 11,835 787Goodwill 1,753 3,353 314Consolidated value of share in associates –1,467 –88 –Revaluation of previously owned share –564 –15 –Non-controlling interests –2,816 – –3Acquisition price 2,733 15,085 1,098Acquisition price –2,733 – 15,085 – 1,098Unpaid purchase price related to acquisition – – 155Settled debt pertaining to acquisitions in earlier years 103 – –Cash and cash equivalents in acquired companies 654 941 11Effect on Group’s cash and cash equivalents, acquisition of operations –1,976 –14,144 –932

5) Divested operations, SEKm 2013 2012 2011Intangible assets 37 14 –Non-current assets 84 370 47Operating assets 1,175 1,417 –Non-current assets held for sale 1,855 3,378 –Operating assets in disposal group – 21,096 580Cash and cash equivalents 306 153 –Cash and cash equivalents in disposal group – 200 22Net debt excl. cash and cash equivalents –345 8 –Net debt in disposal group excl. cash and cash equivalents – –617 –56Provisions –120 –583 –Operating liabilities –413 –767 –48Operating liabilities in disposal group – –6,377 –261Loss on sale* –156 –866 –14Loss in disposal group on sale* – –5 –19Purchase price received after divestment costs 2,423 17,421 251Less:Unpaid purchase consideration –746 – –Unpaid purchase consideration in disposal group – – –109Cash and cash equivalents in divested companies –306 –153 0Cash and cash equivalents in disposal group – –200 –22Cash and cash equivalents in disposal group upon reclassification of joint ventures to associates – – –11Effects on the Group’s cash and cash equivalents, divested operations (Consolidated cash flow statement) 1,371 17,068 109* Excluding reversal of realized translation differences in divested companies to profit or loss. Loss on sale

is included in items affecting comparability in profit or loss.

6) Investments in intangible assets and property, plant and equipmentPayments due to investments in intangible assets, property, plant and equipment, and biological assets totaled SEK 5,550m (5,673; 5,911). In addition, investments amounting to SEK 0m (0; 11) were financed through finance leases. Of total investments of SEK 5,550m (5,673; 5,922) including finance leases, SEK 1,868m (1,987; 1,910) relates to activities to boost the operations’ capacity level (strategic capital expen-ditures) and SEK 3,682m (3,686; 4,012) to activities to maintain the operations’ capacity level (current capital expenditures).

7) Including dividend to non-controlling interests.

8) Cash and cash equivalents, SEKm 2013 2012 2011Cash and bank balances 2,328 1,717 1,121Short-term investments, maturity < 3 months 1,321 300 1,631Total 3,649 2,017 2,752

The Group’s total liquidity reserve at year-end amounted to SEK 21,835m (19,548; 23,768), including unutilized lines of credit of SEK 18,186m (17,531; 21,016).

Interest paid, SEKm 2013 2012 2011Interest paid –1,247 –1,437 –1,383Interest received 56 84 45Total –1,191 –1,353 –1,338



Cash flow from operating activitiesSEKm 2013 2012 2011

Cash flow from operating activities 9,430 11,201 10,145

Less

Cash flow from operating activities in disposal group – –764 –1,574

Add

Current capital expenditures –3,427 –3,161 –3,250

Accrued interest –14 –4 –15

Less accrued interest in disposal group – –1 –

Cash flow from current operations as shown in the operating cash flow statement 5,989 7,271 5,306

Cash flow from investing activitiesSEKm 2013 2012 2011

Cash flow from investing activities –5,510 –3,471 –6,648

Less

Cash flow from investing activities in disposal group – 321 678

Current capital expenditures 3,427 3,161 3,250

Loans granted to external parties – 1,081 179

Less cash flow from loans granted to external parties in disposal group – –26 –17

Repayment of loans from external parties –390 – –

Add

Net debt in acquired and divested operations –2,117 –119 132

Less net debt in acquired and divested operations in disposal group – – –198

Acquisition of non-controlling interests –1,028 – –

Investments through finance leases – – –11

Cash flow from strategic capital expenditures and divestments according to the operating cash flow statement –5,618 947 –2,635

Cash flow for the yearSEKm 2013 2012 2011

Cash flow for the year 1,645 –690 893

Less

Loans granted to external parties – 1,081 179

Repayment of loans from external parties –390 – –

Amortization of debt – 5,421 –

Loans raised –1,955 – –294

Add

Net debt in acquired and divested operations –2,117 –119 132

Accrued interest –14 –4 –15

Investments through finance leases – – –11

Net cash flow according to consolidated operating cash flow statement –2,831 5,689 884

Correlation between consolidated cash flow statement and operating cash flow statement, supplementary disclosures


Financial statements | Group

Consolidated balance sheet

Dec. 31, 2013 Dec. 31, 2012 Dec. 31, 2011

Group Note SEKm EURm1) SEKm EURm1) SEKm EURm1)

ASSETS

Non-current assets

Goodwill 10 13,630 1,526 12,169 1,414 9,433 1,055

Other intangible assets 10 8,031 899 5,460 634 2,629 294

Buildings, land, machinery and equipment 11 51,803 5,799 46,702 5,425 42,599 4,766

Biological assets 12 28,767 3,220 27,503 3,195 26,729 2,991

Participations in associates and joint ventures recognized in accordance with the equity method 13 1,258 141 2,457 285 1,067 119

Shares and participations 14 52 6 60 7 69 8

Surplus in funded pension plans 26 442 49 682 79 2 0

Non-current financial assets 17 2,779 311 2,932 341 2,081 233

Deferred tax assets 9 867 97 818 95 715 80

Other non-current assets 853 95 87 10 187 21

Total non-current assets 108,482 12,143 98,870 11,485 85,511 9,567

Current assets

Inventories 19 12,071 1,351 11,264 1,308 11,009 1,232

Trade receivables 20 14,941 1,672 14,105 1,639 11,548 1,292

Current tax assets 9 417 47 517 60 377 42

Other current receivables 21 2,453 275 2,653 308 2,643 295

Current financial assets 22 227 25 168 20 292 33

Non-current assets held for sale 23 32 4 1,937 225 3,379 378

Cash and cash equivalents 22 3,649 408 2,017 234 2,644 296

Total current assets 33,790 3,782 32,661 3,794 31,892 3,568

Assets in disposal group held for sale – – – – 21,601 2,417

Total assets 142,272 15,925 131,531 15,279 139,004 15,552

EQUITY AND LIABILITIES

Equity 24

Owners of the Parent

Share capital 2,350 263 2,350 273 2,350 263

Other capital provided 6,830 764 6,830 793 6,830 764

Reserves –3,281 –367 –3,691 –429 –2,170 –243

Retained earnings 57,372 6,422 54,217 6,299 53,742 6,013

63,271 7,082 59,706 6,936 60,752 6,797

Non-controlling interests 3,033 340 458 53 539 60

Total equity 66,304 7,422 60,164 6,989 61,291 6,857

Non-current liabilities

Non-current financial liabilities 25 28,444 3,184 23,759 2,760 27,711 3,100

Provisions for pensions 26 2,546 285 4,861 565 3,301 370

Deferred tax liabilities 9 10,432 1,168 9,107 1,058 9,350 1,046

Other non-current provisions 27 414 46 814 94 640 72

Other non-current liabilities 28 172 19 199 23 217 24

Total non-current liabilities 42,008 4,702 38,740 4,500 41,219 4,612

Current liabilities

Current financial liabilities 25 9,828 1,100 9,955 1,156 9,266 1,037

Trade payables 12,504 1,400 12,325 1,432 10,866 1,216

Current tax liabilities 9 745 83 378 44 247 28

Current provisions 27 1,158 130 937 109 629 70

Other current liabilities 29 9,725 1,088 9,032 1,049 7,885 882

Total current liabilities 33,960 3,801 32,627 3,790 28,893 3,233

Liabilities in disposal group held for sale – – – – 7,601 850

Total liabilities 75,968 8,503 71,367 8,290 77,713 8,695

Total equity and liabilities 142,272 15,925 131,531 15,279 139,004 15,552

Contingent liabilities and pledged assets, see Notes 33 and 34.

Capital employed 100,190 11,215 93,091 10,814 97,939 2) 10,957 2)

Net debt 33,886 3,793 32,927 3,825 36,648 3) 4,100 3)

1) Closing exchange rate of 8.93 (8.61; 8.94) was applied in translation to EUR.2) Including capital employed in the packaging operations divested on June 30, 2012.3) Including net debt in the packaging operations divested on June 30, 2012.



Financial statements, Parent Company

Income statementSEKm Note 2013 2012

Administrative expenses –838 –493

Other operating income 457 98

Other operating expenses –212 –95

Operating loss 35, 36, 37 –593 –490

Financial items 38

Result from participations in Group companies 8,533 7,517

Result from participations in other companies 16 43

Interest income and similar profit items 1,028 939

Interest expenses and similar loss items –3,114 –3,718

Total financial items 6,463 4,781

Profit after financial items 5,870 4,291

Appropriations 39 –15 –12

Tax on profit for the year 40 –30 –226

Profit for the year 5,825 4,053

Statement of comprehensive incomeSEKm 2013 2012


Other comprehensive income – –

Total comprehensive income 5,825 4,053

Cash flow statementSEKm 2013 2012

Operating activities

Profit after financial items 5,870 4,291

Adjustment for non-cash items1) –5,554 –345

316 3,946

Income taxes paid 0 0

Cash flow from operating activities before changes in working capital 316 3,946

Cash flow from changes in working capital

Change in operating receivables2) 1,674 –1,978

Change in operating liabilities2) 693 –359

Cash flow from operating activities 2,683 1,609

Investing activities

Acquisition of subsidiaries 218 –474

Repayment of equity from subsidiaries 64 860

Acquisition of non-current assets –584 –299

Divestment of financial assets 181 –

Sale of tangible fixed assets 504 52

Cash flow from investing activities 383 139

Financing activities

Loans raised 95 1,201

Dividend paid –3,161 –2,949

Cash flow from financing activities –3,066 –1,748

Cash flow for the year 0 0

Cash and cash equivalents at the beginning of the year 0 0

Cash and cash equivalents at the end of the year3) 0 0

1) Adjustment for non-cash items 2013 2012

Depreciation/amortization of non-current assets 62 58

Change in accrued items 444 –290

Dividend income in the form of shares received in subsidiaries –5,376 –

Other –684 –113

Total –5,554 –345

2) Dealings of the Parent Company with the Swedish subsidiaries relating to tax are recognized as Change in operating receivables or Change in operating liabilities, respectively.

3) The company’s current account is a subsidiary account and is recognized in the balance sheet as Liabilities to subsidiaries.

Supplementary disclosuresInterest and dividends paid and received 2013 2012

Dividends received 7,267 3,643

Group contribution received 3,730 2,364

Group contribution paid –219 –623

Interest paid –2,439 –3,215

Interest received 368 472

Total 8,707 2,641


Financial statements | Parent Company

Balance sheetSEKm Note Dec. 31, 2013 Dec. 31, 2012

ASSETS

Fixed assets

Capitalized development costs 1 1

Intangible fixed assets 41 1 1

Land and buildings 7,633 6,711

Machinery and equipment 11 13

Tangible fixed assets 42 7,644 6,724

Participations 43 129,174 124,253

Receivables from subsidiaries 44 354 427

Other long-term receivables 123 124

Financial fixed assets 129,651 124,804

Total fixed assets 137,296 131,529

Current assets

Receivables from subsidiaries 44 1,740 3,297

Current income taxes 40 18 18

Other current receivables 45 137 165

Cash and cash equivalents 0 0

Total current assets 1,895 3,480

Total assets 139,191 135,009

SEKm Note Dec. 31, 2013 Dec. 31, 2012

EQUITY, PROVISIONS AND LIABILITIES

Equity 46

Share capital 2,350 2,350

Revaluation reserve 1,363 1,363

Statutory reserve 7,283 7,283

Total restricted equity 10,996 10,996

Retained earnings 36,181 35,289


Total non-restricted equity 42,006 39,342

Total equity 53,002 50,338

Untaxed reserves 39 197 181

Provisions

Provisions for pensions 47 598 536

Provisions for taxes 40 679 649

Other provisions 3 9

Total provisions 1,280 1,194


Liabilities to subsidiaries 44 2,180 2,100

Non-current interest-bearing liabilities 48 19,187 13,493

Other non-current liabilities 0 0

Total non-current liabilities 21,367 15,593

Current liabilities

Liabilities to subsidiaries 44 62,293 67,303

Current interest-bearing liabilities 581 –

Accounts payable 38 24

Other current liabilities 49 433 376

Total current liabilities 63,345 67,703

Total equity, provisions and liabilities 139,191 135,009

Contingent liabilities 50 20,175 19,972

Pledged assets 51 157 156

Change in equity (Refer also to Note 46)

SEKm Share capital Revaluation reserve Statutory reserveRetained earnings and

profit for the year Total equity

Equity at December 31, 2011 2,350 1,363 7,283 38,238 49,234


Dividend, SEK 4.20 per share –2,949 –2,949



Dividend, SEK 4.50 per share –3,161 –3,161



Parent Company | Financial statements

Notes

1 Accounting principles

The most important accounting principles applied in the preparation of this annual report are set out below. The same principles are usually applied in both the Parent Company and the Group. In some cases, the Parent Company applies principles other than those used by the Group and, in such cases, these principles are specified under a separate heading.

BASIS FOR PREPARATIONThe SCA Group’s financial statements are prepared in accordance with the Annual Accounts Act and International Financial Reporting Standards (IFRS)/International Accounting Standards (IAS), as adopted within the EU, and the Swedish Financial Report-ing Board, Recommendation RFR 1 Supplementary Accounting Rules for Groups.

The Parent Company’s financial statements are prepared in accordance with the Swedish Financial Reporting Board’s recommendation RFR 2, Reporting by Legal Entities, and the Annual Accounts Act. The accounts for both the Group and the Parent Company pertain to the fiscal year that ended on December 31, 2013. SCA applies the historical cost method for measurement of assets and liabilities except for biological assets (standing timber), available-for-sale financial assets and financial assets and liabilities, including derivative instruments, measured at fair value through profit or loss, which are measured at fair value either in profit/loss or in other comprehensive income. In the Parent Company, biological assets or financial assets and liabilities are not measured at fair value.

INTRODUCTION OF NEW AND REVISED IAS/IFRSNew IAS/IFRS standards and amendments (IAS/IFRS) and interpretations (IFRIC) that came into effect in 2013 and were adopted by the EU:The following amendments of standards (IAS/IFRS) and new and amended interpretations (IFRIC) came into effect in 2013 and were adopted by the EU. • IAS19EmployeeBenefits• IFRS13FairValueMeasurement• IAS1PresentationofFinancialStatements–PresentationofItemsofOtherComprehensive

Income• IFRS1GovernmentLoans–amendmentstoIAS1• Amendments to IAS 32 Financial Instruments: Presentation – Offsetting Financial

Assets and Financial Liabilities

TheamendmentstoIAS19EmployeeBenefitsmainlycomprisetheremovalofthecorridorapproach and the replacement of interest expenses and expected return on plan assets by a net interest figure calculated using the discount rate, based on the net surplus or deficit in the defined benefit plan. For SCA, which already applies immediate recognition of actuarial gains and losses, this amendment imposes a restriction insofar as the return on plan assets in profit or loss is limited to a predetermined discount rate instead of the company’s long-term expectation of the actual return on plan assets, which applied up to and includ-ing 2012. SCA deems the impact on the consolidated income statement to be immaterial. IFRS13FairValueMeasurementaimstoimproveconsistencyandreducecomplexityinthe application of fair value measurement by providing a precise definition and shared source for the application of fair value measurement, as well as guidance on how it should be applied when other IFRSs already require or permit fair value measurement. The stan-dard has not had a material impact on the Group. As of 2013, the disclosure requirements for financial instruments specified in IFRS 7 and IAS 32 have been expanded to include dis-closures pertaining to the offsetting of financial assets and liabilities. For SCA, this entailed thatlegallybindingframeworkagreements–knownasISDAagreements–recognizedinagrossamountinthebalancesheetaretoberecognizedinanetamount.Noneoftheotherchanges introduced are deemed to have a material impact on the earnings, financial posi-tion or disclosures of the Group or the Parent Company.

New standards, amendments and interpretations published by IASB, but either not yet effective or not yet adopted by the EU:• IFRS9FinancialInstruments(2013)relatestotheclassification,measurementandrec-

ognition of financial liabilities and assets aswell as hedge accounting. IFRS9wasissuedinNovember2009forfinancialassetsandOctober2010forfinancialliabilitiesandreplacesthosepartsofIAS39relatedtoclassificationandmeasurementoffinan-cialinstruments.IFRS9statesthatfinancialassetsmustbeclassifiedintwocategories:financialassetsmeasuredatfairvalueandfinancialassetsmeasurementatamortizedcost. The classification is determined at initial recognition based on the company’s business model and the characteristic conditions in the contractual cash flows. For financialliabilities,nomajorchangestakeplacecomparedwithIAS39.Themostsignif-icant change relates to liabilities identified at fair value. For these, the portion of the fair valuechangearisingfromowncreditriskistoberecognizedinothercomprehensiveincome instead of profit or loss provided that this does not give rise to an accounting mismatch.ThemostrecenteditionofIFRS9includesnewhedgeaccountingrules.Thenew standard entails that more hedging strategies will qualify for hedge accounting, for example, since more risk components in a product may be hedged, provided that such

components are separately identifiable, and since hedging of risk components in non-financial items are permitted. The new standard also allows groups or “layers” of fore-cast flows of items to be identified as hedged items as well as the hedging of net posi-tions, provided that the items in the group individually qualify for hedge accounting. The time value of options and the interest portion of a hedged item may be excluded from theidentificationofhedginginstrumentsandinsteadberecognizedasahedgingcost.Thecostisrecognizedonacontinuousbasisinothercomprehensiveincomeandisaccumulated in a separate component in equity. The assessment of effectiveness will continue to be carried out prospectively and be based on qualitative assessments, dependingonthecomplexityofthehedgingrelationship.The80–125hedgeeffectivethreshold has been eliminated and replaced by an objective-based hedge effective-ness assessment, which focuses on the economic relationship between the hedged item and the hedging instrument.

Until the impairment phase is completed, the IASB has decided not to set a manda-tory date for the application of IFRS 9. However, the standard may be applied inadvance. The standard has not yet been adopted by the EU. SCA will not apply the new standard in advance.

• IFRS 10 Consolidated Financial Statements is based on already existing principlesdefining control as the decisive factor in determining whether a company is to be included in the consolidated accounts. The definition of control is based upon the prem-ise that the owner has the ability to control the company, is entitled to a return and has the power to influence the activities that impact return. The standard provides further guidance should it not be clear whether there is a controlling influence. In light of the new standard, an analysis of shareholders’ agreements was carried out. For some joint ven-tures, the assessment is that SCA has a controlling influence in accordance with IFRS 10. The Group intends to apply IFRS 10 for the fiscal year commencing January 1, 2014.

• IFRS11JointArrangementsisanewstandardforclassificationofjointarrangementsasjoint ventures or joint operations. Decisive for the classification is how the rights and obli-gations are shared by the parties in a joint arrangement. In joint operations, parties to the agreement have rights to the assets and obligations for the liabilities associated with the investment, meaning that the operator must account for its share of the assets, liabili-ties, revenues and costs according to the proportional method. A joint venture entitles the joint owners to the net assets of the investment. In the future, joint ventures will be recognizedinaccordancewiththeequitymethod.SCApreviouslyappliedthepropor-tional method for most of its joint ventures. For those companies that will continue to be classified as joint ventures, the proportional method will be replaced by the equity method,whichentailsthatassetsandliabilitieswillnolongerberecognizedinthebal-ance sheet but rather will be replaced by a net item including the goodwill for each joint venture. The same applies for the income statement, where income and expenses will be replaced by the recognition of the share in profits in the income statement as “Profit fromholdingsinjointventuresandassociates.”However,jointarrangementsclassifiedasjointoperationswillstillberecognizedinaccordancewiththeproportionalmethod.For SCA, an analysis of the new standard has shown that most of the joint arrangements not reclassified as subsidiaries (refer to IFRS 10) will be classified as joint ventures and be restated in accordance with the equity method. A small number of individual arrange-mentswillbeclassifiedasjointoperationsandwillcontinuetoberecognizedinaccor-dance with the proportional method. The Group intends to apply IFRS 11 for the fiscal year commencing January 1, 2014. To reflect the amendments in the new accounting standards IFRS 10 and 11, the income statement and balance sheet have been restated. This will result in an increase in net sales of approximately 4% and an increase in EBIT of about5%for2013.

• IFRS12DisclosuresofInterestsinOtherEntitiesincludesthedisclosurerequirementsfor subsidiaries, joint arrangements, associates and unconsolidated structured entities. The Group intends to apply IFRS 12 for the fiscal year commencing January 1, 2014. The standard will increase the number of disclosures in the Group’s 2014 Annual Report.

NoneofthefollowingIFRSorIFRICinterpretationsthathavenotyetcomeintoeffectareexpected to have any material impact on the Group.• IAS27SeparateFinancialStatements• IAS28InvestmentsinAssociatesandJointVentures• AmendmentstoIAS36:RecoverableAmountDisclosureforNon-FinancialAssets• AmendmentstoIAS39:NovationofDerivativesandContinuationofHedgeAccounting• AmendmentstoIAS19:DefinedBenefitPlans:EmployeeContributions• IFRIC21Levies

USE OF ASSESSMENTSThe preparation of financial statements in conformity with IFRS and generally accepted Swedish accounting principles requires assessments and assumptions to be made that affectrecognizedassetandliabilityitemsandincomeandexpenseitems,respectively,aswell as other information disclosed. The actual results may differ from these assessments.

Board of Director’s ReportSCA Annual Report 201374

Financial statements | Notes – Accounting principles

CONSOLIDATED ACCOUNTSThe consolidated accounts are prepared in accordance with the Group’s accounting prin-ciples and include the accounts of the Parent Company and all Group companies in accor-dance with the definitions below. Group companies are consolidated from the date the Group exercises control or influence over the company according to the definitions pro-vided under the respective category of Group company below. Divested Group compa-nies are included in the consolidated accounts until the date the Group ceases to control or exercise influence over the companies. Intra-Group transactions have been eliminated.

Parent Company:TheParentCompanyrecognizesallholdingsinGroupcompaniesatcostafterdeductionfor any accumulated impairment losses.

SubsidiariesAllcompaniesinwhichtheGroupholdsorcontrolsmorethan50%ofthevotesorwheretheGroup alone, through agreement or in another manner, exercises control, are consolidated as subsidiaries. The consolidated financial statements are prepared in accordance with the purchase method. In business combinations, acquired assets and assumed liabilities are identified and classified, and measured at fair value on the date of acquisition (also known as a purchase price allocation). In step acquisitions when a controlling interest is achieved, any net assets acquired earlier in the acquired units are remeasured at fair value and the result of theremeasurementisrecognizedinprofitorloss.Theeffectsoftheremeasurementuponpaymentoftheliabilityrelatedtoacontingentconsiderationarerecognizedinprofitfortheperiod.Ifthecontrollinginfluenceislostupondivestment,theresultisrecognizedinprofitorloss; any residual holding in the divested business is then measured at fair value on the date ofdivestmentandtheeffectisalsorecognizedinprofitorloss.Transactioncostsincon-junction with acquisitions are not included in cost, but rather expensed directly.

Joint venturesJoint ventures are defined as companies in which SCA together with other parties through an agreement,hassharedcontroloveroperations.Mostjointventuresarerecognizedaccord-ingtotheproportionalmethod,whileasmallnumberarerecognizedinaccordancewiththeequity method.

Measurementofacquiredassetsandliabilitiesaccordingtotheproportionalmethodiscarriedoutinthesamewayasforsubsidiaries.SCArecognizesitsproportionalshareofthe joint venture’s assets, liabilities, income and expenses in its financial statements.

Jointventuresrecognizedinaccordancewiththeequitymethodareinitiallymeasuredat cost, after which the valuation of acquired assets and liabilities is performed in the same manner as for subsidiaries. According to the equity method, the carrying amount for joint ventures also includes goodwill and other Group adjustments. The Group’s share of profit aftertaxarisinginthejointventureaftertheacquisitionisrecognizedononelineinthecon-solidated income statement. Share in profits is calculated on the basis of SCA’s share of equity in the respective joint venture.

AssociatesAssociates are companies in which the Group exercises a significant influence without the partlyownedcompanybeingasubsidiaryorajointventure.Normally,thismeansthattheGroupownsbetween20%and50%ofthevotes.Accountingforassociatesiscarriedoutaccording to the equity method and they are initially measured at cost. Valuation ofacquired assets and liabilities is performed in the same manner as for subsidiaries and the carrying amount for associates includes any goodwill and other Group adjustments.

The Group’s share of profit after tax arising in the associate after the acquisition is rec-ognizedononelineintheconsolidatedincomestatement.Shareinprofitsiscalculatedonthe basis of SCA’s share of equity in the respective associate.

Non-controlling interestsNon-controllinginterestsarerecognizedasaseparateitemintheGroup’sequity.Profitorloss and every component of other comprehensive income are attributable to the owners of the Parent and to non-controlling interests. Losses attributable to non-controlling inter-estsarerecognizedevenifthisresultsinanegativebalancefortheinterest.Inconnectionwith acquisitions of less than 100% when a controlling influence is achieved, non-control-ling interests are determined either as a proportional share of the fair value of identifiable net assets excluding goodwill or at fair value. Subsequent acquisitions up to 100% and divestments of participations in a subsidiary that do not lead to a loss of controlling influ-encearerecognizedasanequitytransaction.

TRANSLATION OF FOREIGN CURRENCYFunctional currency and presentation currencyThe companies in the Group prepare their financial statements in the currency used in the primary economic environment in which they operate. This is known as the functional cur-rency. These reports provide the basis for the consolidated financial statements.

The consolidated financial statements are prepared in Swedish kronor (SEK), which is the Parent Company’s functional currency and therefore the presentation currency.

Translation of foreign Group companiesBalance sheets and income statements for all Group companies whose functional cur-rency is not the presentation currency are translated into the Group’s presentation cur-rencyusingthefollowingprocedures:

• assetsandliabilitiesforeachbalancesheetpresentedaretranslatedattheclosingrateat the date of the balance sheet,

• incomeandexpensesforeachincomestatementpresentedaretranslatedattheaver-age exchange rate for the respective year,

• alltranslationdifferencesthatarisearerecognizedasaseparateitemdirectlyinconsol-idated equity under other comprehensive income.

Exchange differences arising on the financial instruments held to hedge these net assets are also taken directly to consolidated equity under other comprehensive income. When a foreign operation is divested, both translation differences and exchange differences in financial instrumentsheld for thecurrencyhedgingofnetassetsare recognized in theincome statement as part of the gain or loss on disposal. Goodwill and fair value adjust-ments that arise on acquisition are treated as assets and liabilities of the operation and translated according to the same principles as the foreign operation. The financial state-ments of a subsidiary in a hyperinflationary country are adjusted for inflation using the price index for the country in question before these statements are included in the consolidated financial statements.

TRANSACTIONS AND BALANCE SHEET ITEMS IN FOREIGN CURRENCY Transactions in foreign currency are translated to a functional currency using the exchange rateprevailingonthetransactiondate.Monetaryreceivablesandliabilitiesinforeigncur-rency are remeasured at closing date rates at each balance sheet date. Exchange gains or losses that arise from such remeasurement and on payment of the transaction are recog-nizedinprofitorloss,exceptfor–asstatedinIAS39–approvedhedgingtransactionsrelat-ingtocashflowsornetinvestmentswherethegainorlossisrecognizedinequityunderother comprehensive income. Gains and losses on operating receivables and liabilities are recognizednetandreportedwithinoperatingprofit.Gainsandlossesonborrowingandfinancial investmentsarerecognizedasotherfinancial items.Change inthefairvalueofmonetary securities issued in foreign currency and classified as available-for-sale financial assetsisanalyzedandthechangeattributabletochangedexchangeratesisrecognizedinprofitorloss,whileotherunrealizedchangeisrecognizedinequityunderothercomprehen-sive income. Translation differences for non-monetary financial assets and liabilities valued atfairvaluethroughprofitorlossarerecognizedaspartofthefairvaluegainorloss.Transla-tion differences for non-monetary financial assets, classified as held for sale assets are takendirectlytoequityunderothercomprehensiveincome.Non-monetaryassetsandlia-bilitiesrecognizedathistoricalcostaretranslatedattheexchangerateprevailingonthetransaction date.

REVENUE RECOGNITIONSales revenue, synonymous with net sales, comprises the fair value of the consideration received or receivable for sold goods and services within the Group’s ordinary activities. Rev-enueisrecognizedwhendeliverytothecustomerhastakenplaceaccordingtothetermsofthesale.OtherincomeincludescompensationforsalesthatarenotincludedintheGroup’sordinaryactivitiesandincludesrentalrevenue,whichisrecognizedintheperiodcoveredbytherentalcontract,royaltiesandsimilaritems,whicharerecognizedinaccordancewiththeimpliedfinancialeffectofthecontract.Interestincomeisrecognizedinaccordancewiththeeffectiveinterestmethod.Dividendsreceivedarerecognizedwhentherighttoreceiveadivi-dend has been established.

SEGMENT REPORTING Operatingsegmentsarerecognizedinamannerthatcomplieswiththeinternalreportingsubmitted to the chief operating decision maker. The chief operating decision maker is the function that is responsible for allocating resources and assessing the result of the operat-ing segments. At SCA, this function has been identified as the company’s President, who is responsible for and manages the day-to-day administration of the Group in accordance withtheBoard’sguidelinesandtermsofreference.ThetwoExecutiveVicePresidentsandCorporateSeniorManagementsupporthim inhiswork;seethesectionResponsibilityandgovernance,Corporategovernanceonpages50–51.SCA’s threebusinessareas,Personal Care, Tissue and Forest Products, comprise the operating segments.

LEASINGLeases for non-current assets in which the Group essentially carries all the risks and rewards incidental to ownership of an asset are classified as finance leases. The leased asset is rec-ognizedasanon-currentassetandacorrespondingfinancialliabilityisrecognizedamonginterest-bearing liabilities. The initial value of both these items comprises the lower of the fair value of the assets or the present value of the minimum lease payments. Future lease pay-mentsaredividedbetweenamortizationoftheliabilityandfinancialexpenses,sothateachreporting period is charged with an interest amount that corresponds to a fixed interest rate ontherecognizedliabilityfortherespectiveperiod.Theleasedassetisdepreciatedaccord-ing to the same principles that apply to other assets of the same nature. If it is uncertain whether the asset will be taken over at the end of the leasing period, the asset is depreciated over the lease term if this is shorter than the useful life that applies to other assets of the same nature. Leases for assets in which the risks and rewards incidental to ownership are essen-tially carried by the lessor are classified as operating leases. The lease payments are recog-nizedasanexpenseonastraight-linebasisovertheleaseterm.

Parent Company:The Parent Company reports all leases as operating leases.

SCA Annual Report 2013Board of Director’s Report 75

Notes – Accounting principles | Financial statements

IMPAIRMENT LOSSESAssets that have an indefinite useful life are not depreciated, but are annually tested for impairment. The value of depreciated assets is tested for impairment whenever there are indications that the carrying amount might not be recoverable. In cases in which the carry-ing amount of an asset exceeds its estimated recoverable amount, an impairment loss is recognizedontheassetdowntotherecoverableamount.Animpairmentlossrecognizedearlier is reversed, if thereasonsfor theearlier impairmentno longerexist.However,areversal is not higher than the carrying amount would have been if an impairment loss had notbeenrecognizedinpreviousyears.Whentestingforimpairmentofgoodwill,theassetsare grouped in cash-generating units and assessments are made on the basis of these units’ future cash flows. Impairment losses on goodwill are never reversed.

TAXESThe Group’s tax expense comprises deferred tax and current tax on Group companies’ recognizedprofitsduringtheaccountingperiod,adjustmentsrelatingtotaxforpriorperi-ods as well as other changes in deferred taxes for the period. Interest items attributable to income tax and withholding taxes deducted at source on intra-Group transactions are alsorecognizedasincometax.Deferredtaxiscalculatedandrecognizedonalltemporarydifferences between the tax base and the carrying amount. Deferred tax assets relating to deductibletemporarydifferences, losscarryforwardsandtaxcreditsarerecognizedtothe extent it is probable that deductions can be made against future profits.

Deferred tax is not recognized for non-deductible goodwill, or for temporarydiffer-ences that arise on initial recognition of an asset or liability, and which are not attributable toabusinesscombinationanddonotaffecteitherrecognizedprofitortaxableprofit.

Deferred taxes are measured at their nominal amount and based on the tax rates enactedorsubstantivelyenactedonthebalancesheetdate.Foritemsrecognizedinprofitor loss,relatedtaxeffectsarealsorecognizedinprofitor loss.Foritemsrecognizedinequity under other comprehensive income, related tax effects are also recognized inequity under other comprehensive income. Deferred taxes relating to temporary differ-ences attributable to investments in subsidiaries and participations in joint ventures are not recognized inSCA’sconsolidatedfinancialstatementssinceSCAAB, inallcases,cancontrol the time of reversal of the temporary differences and it is not considered probable that such reversal will occur in the near future.

Parent Company:Due to the links between accounting and taxation, the deferred tax liability on untaxed reservesintheParentCompanyisrecognizedintheParentCompany’sannualaccountsas a component of untaxed reserves.

INTANGIBLE ASSETSGoodwillThe compensation transferred in a business combination is measured at fair value. In con-nection with a business combination when the consideration transferred, any non-control-ling interests and the fair value of previous shares of equity (for step acquisitions) exceeds thefairvalueoftheacquirednetassets,thedifferenceisrecognizedasgoodwill.Whenthisdifferenceisnegative,theamountisrecognizedinprofitorloss.Acquisitionsofnon-con-trolling interests are measured on an acquisition-by-acquisition basis, either as a propor-tional share of the fair value of identifiable net assets excluding goodwill (partial goodwill) or atfairvalue,whichmeansthatgoodwillisalsorecognizedonnon-controllinginterests(fullgoodwill). Goodwill that arises in acquisitions of associates is included in the carrying amount of the associate. Goodwill is distributed to the cash-generating units within each operating segment that is expected to benefit from the business combination for which the goodwill arose. Goodwill is tested annually for any impairment requirement. Goodwill is rec-ognizedatcostreducedbyaccumulatedimpairmentlosses.Impairmentlossesongood-willarenotreversed.Netgainsor lossesfromthesaleofGroupcompaniesincludetheremaining carrying amount of the goodwill attributable to the divested unit.

TrademarksTrademarksarerecognizedatcostafteranyaccumulatedamortizationandaccumulatedimpairments.Trademarksthatarefoundtohaveanindefiniteusefullifearenotamortized,but instead tested annually for impairment in the same manner as goodwill. Cash-generat-ing units identified for these trademarks comprise the geographical market where the trademarkexists. Trademarkswith a limiteduseful life areamortizedona straight-linebasis during their anticipated useful life, which varies between three and seven years.

Research and developmentResearchexpenditureisrecognizedasanexpenseasincurred.Incasesinwhichitisdiffi-cult to separate the research phase from the development phase in a project, the entire project is treated as research and expensed immediately. Identifiable expenditure for developmentofnewproductsandprocessesiscapitalizedtotheextentitisexpectedtoprovide future economic benefits. In other cases, development costs are expensed as incurred.Capitalizedexpenditureisdepreciatedinastraightlinefromthedatewhentheasset starts to be used or produces commercially and during the estimated useful life of the asset. The depreciation period is between five and ten years.

Emission allowances and costs for carbon dioxide emissionsEmissionallowancesrelatingtocarbondioxideemissionsarerecognizedasanintangibleasset and as deferred income (liability) when they are received. Allowances are received freeofchargeandmeasuredandrecognizedatmarketvalueasofthedatetowhichtheallocationpertains.Forallocatedemissionallowances,therecognizedcostandprovisionsfor emissions amount to the market value as of the date to which the allocation pertains. Forpurchasedemissionallowances, the recognizedcostandprovisions foremissionsamount to the purchase price. During the year, the initial liability for emission allowances received is dissolved over profit or loss as income in pace with carbon dioxide emissions made. If the market price of emission allowances on the balance sheet date is less than recognizedcost,anysurplusemissionallowancesthatarenotrequiredtocoveremissionsmade are impaired to the market price applying on the balance sheet date. In conjunction withthis,theremainingpartofthedeferredincomeisrecognizedasincomebyacorre-sponding amount and therefore no net effect occurs in profit or loss. The emission allow-ances are used as payment in the settlement with the state regarding liabilities for emis-sions. If the emission allowances received do not cover emissions made, SCA makes a provision for the deficit valued at the market value on the balance sheet date. Sales of sur-plusemissionallowancesarerecognizedasincomeonthesettlementdate.

Other intangible assetsIntangible assets also include patents, licenses and other rights. At acquisition of such assets,thecostoftheacquisitionisrecognizedasanassetandamortizedonastraight-line basis over the anticipated useful life, which varies between 3 and 20 years.

PROPERTY, PLANT AND EQUIPMENTProperty,plantandequipmentarerecognizedatcostafterdeductionforaccumulateddepreciation and any accumulated impairment. Cost includes expenditure that can be directly attributed to the acquisition of the asset as well as transfer from equity of the gains and losses from approved cash flow hedges relating to purchases in foreign currency of property, plant and equipment. The cost of properties and production facilities included in major projects includes, unlike costs for other investments, expenditure for running-in and start-up. Expenditure for interest during the construction and assembly period is included in cost for qualifying investment projects. All expenditure for new investments in progress iscapitalized.Allotherformsofrepairandmaintenancearerecognizedasexpensesinprofit or loss in the period in which they are incurred. Land is regarded as having an indefi-nite useful life and is therefore not depreciated. Depreciation of other property, plant and equipment is performed on a straight-line basis down to the estimated residual value of the assetandduringtheanticipatedusefullifeoftheasset.Usefullivesareassessedas:

Number of years

Pulp and paper mills, sawmills 10–25

Converting machines, other machinery 7–18

Tools 3–10

Vehicles 4–5

Buildings 15–50

Energy plants 15–30

Computers 3–5

Officeequipment 5–10

Harbors,railways 20–30

Land improvements, forest roads 10–20

The residual values and useful lives of assets are tested on a continuous basis and adjusted when required.

Parent Company:TheParentCompany’sproperty,plantandequipment,whicharerecognized inaccor-dance with the Group’s accounting principles, include standing timber, which in the Group isclassifiedasabiologicalasset.Nosystematicdepreciationorchangesinvalueincon-junction with felling is carried out in the Parent Company. Collective revaluation of forest assets has occurred. The revaluation amount was placed in a revaluation reserve in equity.

BIOLOGICAL ASSETSTheGroup’sstandingtimberisdefinedandrecognizedasabiologicalasset.Forestlandand forest roads are classified as land and land improvements. The biological assets are measuredandrecognizedat fairvalueafterdeduction forestimatedsellingcosts.Thechangeinvalueisrecognizedinprofitorloss.ThefairvalueoftheGroup’sstandingtimberis calculated as the present value of anticipated future cash flow from the assets before tax. The calculation is based on existing, sustainable felling plans and assessments regarding growth, timber prices, felling costs and silviculture costs, including costs for statutory replanting. Environmental restrictions and other limitations are taken into account and the calculation is performed for a production cycle that SCA estimates at an average of 100 years. The discount factor is based on a normal forest company’s weighted average cost of capital (WACC).

Parent Company:The Parent Company reports standing timber as property, plant and equipment at histori-cal cost.

Note 1 –Accountingprinciples,cont.


Financial statements | Notes – Accounting principles

FINANCIAL INSTRUMENTSFinancialinstrumentsrecognizedinthebalancesheetincludecashandcashequivalents,securities, other financial receivables, trade receivables, trade payables, loans and deriva-tives.

Recognition in and derecognition from the balance sheetPurchasesandsalesoffinancialinstrumentsarerecognizedinthefinancialstatementsonthe trade date, with the exception of loan receivables, available-for-sale financial assets and other financial liabilities, all of which are recorded on the settlement date. Financial instruments are initially recognized at cost,which corresponds to the fair value of theinstrumentincludingtransactioncosts.Financialassetsarederecognizedfromthebal-ance sheet when the risk and the right to receive cash flows from the instrument have ceasedorbeentransferredtoanothercounterparty.Financialliabilitiesarederecognizedfrom the balance sheet when SCA has met its commitments or they have been otherwise extinguished. SCA reports financial instruments with a remaining maturity of less than 12 months as current assets and liabilities and those that exceed 12 months as non-current assetsandliabilities.Thedurationofutilizedloansundersyndicatedlinesofcreditarerec-ognizedwiththesamedurationasthelineofcredit.Recognitiontakesplaceonthebasisof the categories specified below.

MeasurementThe fair value of financial instruments is calculated on the basis of prevailing market listings on the balance sheet date. For financial assets and listed securities, the actual prices on the balance sheet date are used. In the absence of market listings, SCA determines fair values with the aid of common valuation models, such as discounting of future cash flows to listed market rates for each duration. These calculated cash flows are established based on avail-able market information. Impairment of financial assets takes place when there is objective proof of impairment, such as cessation of an active market or where it is probable that the debtors cannot meet their commitments. For disclosures in a note relating to non-current loans, current market interest rates are taken into account in fair value calculations. The fair value of short-term loans and investments is considered to correspond to the carrying amount, since a change in market interest rates does not have a significant effect on market value.

Cash and cash equivalentsCash and cash equivalents are defined as cash and bank balances as well as short-term investments with a maturity of less than three months from the acquisition date. Restricted deposits are not included in cash and cash equivalents.

Classification and subsequent recognitionClassification of financial instruments is determined on the original acquisition date, and the purpose of the transaction determines the choice of category. SCA classifies its finan-cial instruments in the categories below.

Financial assets at fair value through profit or lossAssets are classified in this category when the intention is to sell in the short term. Deriva-tives with a positive market value are classified in this category if they are not identified as hedges and meet the requirements for hedge accounting. Assets in this category are rec-ognizedcontinuouslyatfairvalueandchangesinvaluearerecognizedinprofitorloss.Onlyfinancialderivativeswereclassifiedinthiscategoryduringtheyear.

Held-to-maturity investmentsHeld-to-maturityinvestmentsaredefinedasfinancialassetsthatarenotderivativesandthat have fixed or determinable payments and that SCA intends and is able to hold to matu-rity.Assetsinthiscategoryaremeasuredatamortizedcostapplyingtheeffectiveinterestmethod, which means they are accrued so that a constant return is obtained.

Loans and trade receivablesLoans and trade receivables, which are not derivatives, are financial assets with fixed or determinable payments that are not quoted in an active market. Receivables arise when SCA provides money, goods or services directly to another party without any intention of conductingtradinginthereceivables.Assetsinthiscategoryaremeasuredatamortizedcost lessapotentialprovision for impairment.Trade receivablesare recognized in theamount at which they are expected to be paid, based on an individual assessment of bad debts. Any impairment of trade receivables affects SCA’s operating profit.

Available-for-sale financial assetsThis category includes financial assets that are not derivatives and that are designated in this category at initial recognition or that have not been classified in any other category. Assets in this category are measured continuously at fair value. Changes in value are rec-ognizedinequityunderothercomprehensiveincome.Achangeattributabletoexchangeratemovements,however,isrecognizedinprofitorloss.Whentheassetissold,thecumu-lativegainorlossthatwasrecognizedinequityisrecognizedinprofitorloss.

Financial liabilities at fair value through profit or lossThis category includes derivatives with negative fair values that are not used for hedge accounting and financial liabilities held for trading. Liabilities in this category are continu-

ouslymeasuredatfairvalueandchangesinvaluearerecognizedinprofitorloss.Onlyderivatives were classified in this category during the year.

Financial liabilities measured at amortized costThis category includes financial liabilities that are not held for trading. These are recog-nizedinitiallyatfairvalue,netaftertransactioncosts,andsubsequentlyatamortizedcostaccording to the effective interest method.

Accounting for derivatives used for hedging purposesAllderivativesareinitiallyandcontinuouslyrecognizedatfairvalueinthebalancesheet.Gains and losses on remeasurement of derivatives used for hedging purposes are recog-nized as described below. In hedge accounting, the relationship between the hedgeinstrument and the hedged item is documented. Assessment of the effectiveness of the hedge is also documented, both when the transaction is initially executed and on an ongo-ing basis. Hedge effectiveness is the extent to which the hedging instrument offsetschanges in value in a hedged item’s fair value or cash flow.

Cash flow hedgesGains and losses on remeasurement of derivatives intended for cash flow hedging are rec-ognizedinequityunderothercomprehensiveincomeandreversedtoprofitorlossattherate at which the hedged cash flow affects profit or loss. Any ineffective part of the change invalueisrecognizeddirectly inprofitor loss.Ifahedgerelationshipisinterruptedandcashflowisstillexpected,theresultisrecognizedinequityunderothercomprehensiveincome until the cash flow affects the result. If the hedge pertains to a balance sheet item, the result is transferred from equity to the asset or liability to which the hedge relates when the value of the asset or liability is determined for the first time. In cases in which the fore-cast cash flow that forms the basis of the hedging transaction is no longer assessed as probable,thecumulativegainorlossthatisrecognizedinequityunderothercomprehen-sive income is transferred directly to profit or loss. Cash flow hedges relating to energy affect the energy costs, that is, cost of goods sold. Transaction exposure’s cash flow hedges affect consolidated net sales and expenses. Cash flow hedges relating to interest expenses affect net financial items.

Hedges of net investments in foreign operationsGains and losses on remeasurement of derivatives intended to hedge SCA’s net invest-mentsinforeignoperationsarerecognizedinequityunderothercomprehensiveincome.Thecumulativegainorlossinequityisrecognizedinprofitorlossintheeventofdivest-ment of the foreign operation.

Fair value hedgesThe gain or loss from remeasurement of a derivative relating to fair value hedges is recog-nized inprofitor losswithchanges in fair valueof theassetor liabilityexposed to thehedged risk. For SCA, this means that non-current loans that are subject to hedge accounting are discounted without a credit spread, since the credit spread is deemed to have a marginal impact on the calculation, to market interest rates and meet inherent inter-est rate derivatives’ discounted cash flows at the same rate. Since the entire change in valuefromthederivativeisrecognizeddirectlyinprofitorloss,anyineffectivenessisrec-ognizedonanongoingbasisinprofitorloss.

Financial hedgesWhen SCA conducts hedges and the transactions do not meet requirements for hedge accountingaccordingtoIAS39,changesinfairvalueofthehedginginstrumentarerecog-nizeddirectlyinprofitorloss.

INVENTORIESInventoriesarerecognizedatthe lowerofcostandnetrealizablevalueonthebalancesheetdate.Costiscalculatedusingthefirst-in,first-out(FIFO)orweightedaveragecostformula.However, thecostofgoodsproducedandsegregated forspecificprojects isassigned by using specific identification of their individual costs. The cost of finished goods and work in progress includes raw materials, direct labor, other direct expenses and production-related overheads, based on a normal production level. Interest expenses arenotincludedinmeasurementofinventories.Netrealizablevalueistheestimatedsellingprice in the ordinary course of business, less the estimated cost of completion and sale of the item. The holding of felling rights for standing timber is valued at contract prices, which onaveragedonotexceedthelowerofnetrealizablevalueandcost.

NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONSNon-currentassets (anddisposalgroups)areclassifiedasNon-currentassetsheld forsale if their value, within one year, will be recovered through a sale and not through contin-uedutilizationinoperations.Onthereclassificationdate,theassetsandliabilitiesaremea-sured at the lower of fair value minus selling costs and the carrying amount. Following reclassification, no depreciation is carried out on these assets.

If there is an increase of the fair value less a deduction for selling expenses, a gain is rec-ognized. The gain is limited to the amount equivalent to previouslymade impairmentcharges.Bothgainsandlossesonsubsequentvaluechangesarerecognizedinprofitorloss for the year.


Notes – Accounting principles | Financial statements

Classification as a discontinued operation occurs either when an independent business segment or a significant operation within a geographic area is divested. The divestment date, or the point in time when the operation fulfils the criteria for classification as held for sale, determines when the operation should be classified as a discontinued operation.

Profit/lossaftertaxfromdiscontinuedoperationsisrecognizedonaseparatelineintheincome statement. Comparative figures in the income statement are adjusted as though the discontinued operation had been disposed of at the start of the comparative year.

Parent Company:Non-currentassetsheld forsalearenot reclassifiedanddepreciationdoesnotcease.Instead, if such assets exist, the information is disclosed.

EQUITYTransactioncostsdirectlyrelatingtotheissueofnewsharesoroptionsarerecognized,netafter tax, in equity as a reduction in the issue proceeds. Expenditure for the purchase of SCA’s treasury shares reduces retained earnings in equity in the Parent Company and the portion of consolidated equity that pertains to owners of the Parent. When these are sold, the sales proceeds are included in retained earnings in the equity pertaining to owners of the Parent.

EMPLOYEE BENEFITSPensionsThere are many defined contribution and defined benefit pension plans within the Group, partofthesearefundedwithplanassets.Theliabilityrecognizedinthebalancesheetfordefined benefit pension plans is the present value of the obligation on the balance sheet date minus the fair value of the plan assets. Funded plans with net assets, that is, plans withassetsexceedingobligations,arerecognizedasafinancialasset.Thedefinedbenefitobligation is calculated annually by independent actuaries using the Projected Unit Credit Method.Theobligationisvaluedatthepresentvalueofanticipatedfuturecashflowsusinga discount rate that corresponds to the interest on first-class corporate bonds or, where these do not exist, government bonds or mortgage bonds issued in the currency in which the benefits will be paid and with a remaining maturity that is comparable to the actual pen-sionliability.Actuarialgainsandlossesarerecognizeddirectlyinequityunderothercom-prehensive income in the period in which they arise. The total cost for the defined benefit plans includes personnel costs as well as net interest items comprising the discount rate calculated on the average net pension liability for the year, taking fee and remuneration payments into consideration. The difference between the interest income on the plan assets and SCA’s return on the plan assets is included in the remeasurement of the defined benefitnetliability(netasset)recognizedinequityunderothercomprehensiveincome.TheGroup’spayments relating todefinedcontributionplansare recognizedasanexpenseduring the period the employees carry out the service to which the payment relates. Pre-paidcontributionsareonlyrecognizedasanassettotheextenttheGroupisentitledtoarepaymentorreductionoffuturepayments.Pastservicecostsarerecognizeddirectlyinprofit or loss. A special payroll tax (corresponding to contributions) is calculated on the dif-ferencebetweenthepensionliabilitydeterminedaccordingtoIAS19andthepensionlia-bilitydeterminedaccordingtotherulesappliedinthelegalentity.Payrolltaxisrecognizedas an expense in profit or loss except with regard to actuarial gains and losses where the payrolltax,liketheactuarialgainsandlosses,isrecognizeddirectlyinequityunderothercomprehensive income.

Parent Company:TheParentCompanyappliestheregulationsinthePensionObligationsVestingAct(Tryg-gandelagen). Accounting complies with FAR SRS’s (the institute for the accountancy pro-fessioninSweden)accountingrecommendationNo.4,Accountingforpensionliabilitiesandpensioncosts.ThemaindifferencecomparedwithIAS19isthatSwedishpracticedisregards future increases in salaries and pensions when calculating the present value of the pension obligation. This present value includes, however, a special reserve for future payments of pension supplements indexed for inflation. Both defined contribution and defined benefit plans exist in the Parent Company.

Other post-retirement benefitsSome Group companies provide post-retirement healthcare benefits. The obligation and anticipatedcostsforthesebenefitshasbeencalculatedandrecognizedinasimilarman-ner to that applying to defined benefit pension plans.

Severance paySeverance pay is paid when the Group issues notice to an employee prior to the retirement date or when an employee voluntarily accepts retirement in exchange for such compensa-tion.Severancepay isrecognizedasanexpensewhentheGrouphasanobligationtocompensate employees whose employment was terminated early.

PROVISIONSProvisions forclean-upcosts, restructuringor legaldisputesare recognizedwhen theGroup has, or can be considered to have, an obligation as the result of events that have occurred and it is probable that payments will be required to fulfill the obligation. In addi-tion, it must be possible to make a reliable estimate of the amount to be paid. The provision is valued at the present value of the anticipated future expenditure to settle the obligation. If

2 Key assessments and assumptions

Preparation of annual accounts and application of different accounting standards are often based on management assessments or on assumptions and estimates that are regarded as reasonable under the prevailing circumstances. These assumptions and esti-mates are often based on historical experience, but also on other factors, including expec-tations of future events. With other assumptions and estimates, the result may be different and the actual result will, by definition, seldom concur with the estimated result.

The assumptions and estimates that SCA considers to have the greatest impact on earnings, as well as assets and liabilities, are discussed below.

VALUATION OF BIOLOGICAL ASSETSSince a market price or other comparable value does not exist for assets of the scope ownedbySCA,biologicalassets–thatis,standingforest–aremeasuredatthevalueofanticipated future cash flows.

Calculation of these cash flows is based on the felling plan from the most recent forest survey that is available. Forest surveys are updated every ten years. The calculation is also based on assumptions with regard to growth, selling prices, costs for felling and silvicul-ture as well as costs for replanting, which is a prerequisite for felling. These assumptions are mainly based on experience and are only changed when a change in price and cost levels is assessed as being long term. The cash flow covers a production cycle which SCA estimates to amount to an average of 100 years. The discount factor used is the weighted average cost of capital (WACC) that is normally used in valuations of similar assets.

The consolidated value of biological assets at December 31, 2013 amounted to SEK 28,767m.ForfurtherinformationseeNote12.

GOODWILLEach year, the Group examines whether there is any impairment requirement relating to goodwill. Goodwill is divided among cash-generating units and these concur with the Group’s operating segments.

The recoverable amount for the cash-generating units is determined by calculating value in use. This calculation is based on the Group’s existing strategic plans. These plans rest on market-based assumptions and include anticipated future cash flows for the exist-ing operations during the next ten-year period. Cash flows beyond the ten-year period are taken into account by applying an operating surplus multiple to sustained cash flow. This multiple concurs with current market multiples for similar operations.

The discount factors used in the present value calculation of the anticipated future cash flows is the current weighted average cost of capital (WACC) established within the Group for the markets in which the cash-generating units conduct operations. Impairment testing for the year did not indicate any impairment requirement. Goodwill for the Group at December31,2013amountedtoSEK13,630m.ForfurtherinformationseeNote10.

PENSIONS Costs, as well as the value of pension obligations for defined benefit pension plans, are based on actuarial calculations that apply assumptions on discount rate, future salary increases, inflation and demographic conditions.

The Group’s net defined benefit obligations and the fair value of plan assets amounted toSEK2,104matDecember31,2013.Forfurtherinformation,seeNote26.

TAXESDeferred tax is calculated on temporary differences between the carrying amounts and the tax values of assets and liabilities. There are primarily two areas where assumptions andassessmentsaffectrecognizeddeferredtax.Oneisassumptionsandassessmentsused to determine the carrying amounts of the different assets and liabilities. The other is assumptionsandassessmentsrelatedtofuturetaxableprofits,wherefutureutilizationofdeferredtaxassetsdependsonthis.AsatDecember31,2013,SEK867mwasrecognizedas deferred tax assets based on assumptions regarding future taxable. For further infor-mationseeNote9.Significantassessmentsandassumptionsarealsomaderegardingrecognition of provisions and contingent liabilities relating to tax risks. For further informa-tionseeNote27andNote33.

Note 1 –Accountingprinciples,cont.

the impact of time is material, discounting is applied with an interest rate before taxes. Increases inprovisionsdue to timeare recognizedonanongoingbasisasan interestexpense in profit or loss.

GOVERNMENT GRANTSGovernmentgrantsarerecognizedatfairvaluewhenthereisreasonableassurancethegrants will be received and that the Group will comply with the conditions attached to them.Governmentgrantsrelatedtoacquisitionofassetsarerecognizedinthebalancesheet by the grant reducing the carrying amount of the asset. Government grants received ascompensationforcostsareaccruedandrecognizedinprofitorlossduringthesameperiod as the costs. If the government grant or assistance is neither related to the acquisi-tionofassetsnortocompensationforcosts,thegrantisrecognizedasotherincome.


Financial statements | Notes – Group

3 Acquisitions and divestments

ACQUISITIONSAcquisitionsmadeduringtheyeartotaledSEK5,466m,includingassumednetdebt.Theacquisitionsmainlyrelateto:

Company Operations Acquisition dateAcquisition price1),

SEKmGoodwill,

SEKm Acquired %Total holding after

acquisition %

Vinda,HongKong Tissue December, 2013 4,506 1,743 29.7 51.4

Other 960 10

Total 5,466 1,7531) Acquisition price pertains to purchase price including assumed net debt.

TheacquisitionsabovearereportedintheBoardofDirectors’Reportonpage25underthe section Acquisitions, investments and divestments. In September 2013, SCA decided tomakeacashofferofHKD11.00persharefortheChinesetissuecompanyVinda.TheofferwasconditionalonSCAachieving50%ownershipofVinda.SCAalreadyowneda21.7%stakeinVinda,whichwasrecognizedasanassociatedcompanyintheGroup.AtthecloseoftheacceptanceperiodonNovember11,SCAbecamethemajorityownerwith59.95%ofthesharesinthecompany.Atotalof8.55%oftheshareshassincebeensoldandSCAcurrentlyowns51.4%ofthesharesinthecompany.Theconsiderationtrans-ferredamountedtoSEK2,687m.Duringtheyear,SCAHygieneProductsSE(SocietasEuropeas),formerlyPWA,becameawhollyownedsubsidiaryofSCA.Outstandingshareswere acquired through two compulsory redemptions from non-controlling interests (minority shareholdings). The consideration transferred amounted to SEK 1,028m.

OftheacquisitionsfortheyeartotalingSEK5,466m,SEK3,004mwaspaid incashincludingassumedcashandcashequivalents,andtheremainingSEK2,462mcomprisesassumed net debt. Acquisition costs of approximately SEK 47m relating to acquisitions in 2013 are included in operating profit.

VindaisalistedcompanyontheHongKongStockExchangeandmustthusfollowtheregulations issued by the exchange. The rules governing inside information stipulate that all information is to be provided to all shareholders simultaneously, which means that SCA onlyhasaccesstothe informationthatVindahaspublicallydisclosed.ThepreliminaryacquisitionanalysiswasthusbasedonpublishedinformationfromVinda.This, inturn,means that the calculations of fair value adjustments, intangible assets and goodwill are preliminary.Duetoalackofdetailedinformation,SCAhaschosentorecognizeVindaonaseparate line in its notes in accordance with the preliminary acquisition analysis. Earlier holdingsinVindahavebeenrestatedinaccordancewithIFRSandhadapositiveremea-surementeffectofSEK564m,whichwasrecognizedunderitemsaffectingcomparabilityin the income statement. Goodwill was calculated according to the partial goodwill method and thenon-controlling interestwas thusvaluedat48.6%of the identifiednetassets.Goodwill is attributable to the company’s strong market positions in the tissue market in China.

Effect on sales and earnings of acquisitions for the yearAccordingtotheinterimreportforthefirstsixmonthsof2013,Vinda’snetsalesforthefirsthalf of 2013 amounted to SEK 2,773m and its net profit for the period totaled SEK 238m.

Since the acquisition date, other acquisitions have had an impact of SEK 23m on con-solidatednetsalesandanegativeimpactofSEK13monnetprofitfortheperiod.Hadtheother acquisitions been consolidated as of January 1, 2013, the acquired net sales would haveamountedtoSEK58mandanetlossofSEK69mwouldhavebeenposted.

Acquired operationsThetabletotherightshowsthefairvalueofacquirednetassetsrecognizedontheacquisi-tiondate,recognizedgoodwillandtheeffectontheGroup’scashflowstatements.

Acquisition balance sheet

SEKm 20131) 2012 2011

Intangible assets 2,901 3,077 100

Non-currentassets 4,420 7,357 719

Operatingassets 2,478 4,987 125

Cash and cash equivalents 654 941 11

Provisions and other non-current liabilities –732 –1,447 –27

Netdebtexcl.cashandcashequivalents –2,462 –728 –51

Operatingliabilities –1,432 –3,263 –90

Non-currentassetsheldforsale – 911 –

Fair value of net assets 5,827 11,835 787

Goodwill 1,753 3,353 314

Consolidated value of share in associates –1,467 –88 –

Revaluation of previously owned share –564 –15 –

Non-controllinginterests –2,816 – –3

Consideration transferred 2,733 15,085 1,098

Consideration transferred –2,733 –15,085 –1,098

Unpaid purchase price related to acquisition – – 155

Settled debt pertaining to acquisitions in earlier years 103 – –

Cash and cash equivalents in acquired companies 654 941 11

Effect on Group’s cash and cash equivalents, acquisition of operations (Consolidated cash flow statement) –1,976 –14,144 –932

Acquisition of non-controlling interests –1,028 – –

Acquired net debt excl. cash and cash equivalents –2,462 –728 –51

Acquisition of operations during the year incl. net debt assumed (Consolidated operating cash flow statement) –5,466 –14,872 –983

Specification of acquisition balance sheets for 20131)

SEKm Vinda Other Total

Intangible assets 2,895 6 2,901

Non-currentassets 4,393 27 4,420

Operatingassets 2,455 23 2,478

Cash and cash equivalents 642 12 654

Provisions and other non-current liabilities –726 –6 –732

Netdebtexcl.cashandcashequivalents –2,461 –1 –2,462

Operatingliabilities –1,411 –21 –1,432

Fair value of net assets 5,787 40 5,827

Goodwill 1,743 10 1,753

Consolidated value of share in associates –1,467 – –1,467

Revaluation of previously owned share –564 – –564

Non-controllinginterests –2,812 –4 –2,816

Consideration transferred 2,687 46 2,733

Consideration transferred –2,687 –46 –2,733

Settled debt pertaining to acquisitions in earlier years – 103 103

Cash and cash equivalents in acquired companies 642 12 654

Effect on Group’s cash and cash equivalents, acquisition of operations (Consolidated cash flow statement) –2,045 69 –1,976

Acquisition of non-controlling interests – –1,028 –1,028

Acquired net debt excl. cash and cash equivalents –2,461 –1 –2,462

Acquisition of operations during the year incl. net debt assumed (Consolidated operating cash flow statement) –4,506 –960 –5,4661) The acquisition balance sheets for 2013 are preliminary.


Notes – Group | Financial statements

ADJUSTMENT OF PRELIMINARY ACQUISITION BALANCE SHEETS FOR 2013An acquisition analysis is considered preliminary until 12 months after the acquisition, at which point it becomes confirmed. Adjustments to the acquisition analysis result in changes to the income statement and balance sheet for the comparative period. The acquisition balance sheet for Everbeauty, which was acquired on June 1, 2012, has been confirmed in accordance with the preliminary acquisition analysis. Upon adoption of the balance sheets for other acquisitions, goodwill totaling SEK 135mwas reclassified toproperty, plant and equipment and deferred tax. The preliminary acquisition analysis pre-viouslyrecognizedforGeorgia-Pacificwasconfirmedin2013.Inthefinalacquisitionanaly-sis, the value of non-current assets and related deferred taxes was adjusted and it was determinedthatpreviouslyuncapitalizedlosscarryforwardscouldbecapitalized,whichreducedgoodwillrecognizedearlier.Thefinalacquisitionanalysis,includingadjustments,is shown below.

Final acquisition analysis for Georgia Pacific

SEKm PreliminaryNew

assumptions Final

Intangible assets 2,493 – 2,493

Non-currentassets 5,830 321 6,151

Operatingassets 4,292 –1 4,291

Cash and cash equivalents 633 – 633

Provisions and other non-current liabilities –1,193 –47 –1,240

Netdebtexcl.cashandcashequivalents –476 – –476

Operatingliabilities –2,775 –21 –2,796

Non-currentassetsheldforsale 750 – 750

Fair value of net assets 9,554 252 9,806

Goodwill 1,960 –252 1,708

Consideration transferred 11,514 0 11,514

Consideration transferred –11,514 – –11,514

Cash and cash equivalents in acquired companies 633 – 633

Effect on Group’s cash and cash equivalents (Consolidated cash flow statement) –10,881 – –10,881

Acquired net debt excl. cash and cash equivalents –476 – –476

Acquisition of operations incl. net debt assumed (Consolidated operating cash flow statement) –11,357 – –11,357

DIVESTMENTSOnApril2,thedivestmentofSCA’sAustrianpublicationpapermillinLaakirchenwascom-pleted. The initial purchase consideration amounted to EUR 100m, with a possible addi-tional purchase price amounting to a maximum of EUR 100m based on a two-year profit-sharing model. During the fourth quarter of 2012, earnings were charged with an impair-mentlossforaccountingpurposesofSEK435mpertainingtonon-currentassetsinLaa-kirchen.Laakirchen’sannualsalesfor2012amountedtoSEK2,759m(EUR316m).

In conjunction with SCA’s acquisition of Georgia-Pacific’s European tissue operations in 2012, the European Commission demanded that certain divestments be made in the consumer tissue segment. These divestments, which primarily comprised operations acquired from Georgia-Pacific, were carried out by SCA and approved by the European Commissionin2013.ThepurchaseconsiderationamountedtoSEK948mandthedivest-mentsgeneratedalossofSEK156m.

Assets and liabilities included in divestmentsSEKm 2013 2012 2011

Intangible assets 37 14 –

Non-currentassets 84 370 47

Operatingassets 1,175 1,417 –

Non-currentassetsheldforsale 1,855 3,378 –

Operatingassetsindisposalgroup – 21,096 580

Cash and cash equivalents 306 153 –

Cash and cash equivalents in disposal group – 200 22

Netdebtexcl.cashandcashequivalents –345 8 –

Netdebtindisposalgroupexcl.cash and cash equivalents – –617 –56

Provisions –120 –583 –

Operatingliabilities –413 –767 –48

Operatingliabilitiesindisposalgroup – –6,377 –261

Gain/loss on sale1) –156 –866 –14

Loss in disposal group on sale1) – –5 –19

Purchase price received after divestment costs 2,423 17,421 251

Less:

Unpaid purchase consideration –746 – –

Unpaid purchase consideration in disposal group – – –109

Cash and cash equivalents in divested companies –306 –153 0

Cash and cash equivalents in disposal group – –200 –22

Cash and cash equivalents in disposal group upon reclassification of joint ventures to associates – – –11

Effect on the Group’s cash and cash equivalents, divested operations (Consolidated cash flow statement) 1,371 17,068 109

Less:

Divested net debt excl. cash and cash equivalents 345 –8 –

Cash flow from divestments in disposal group – 5 –322

Add:

Cash and cash equivalents in disposal group – – 22

Cash and cash equivalents in disposal group upon reclassification of joint ventures to associates – – 11

Divested net debt in disposal group excl. cash and cash equivalents – 617 56

Unpaid purchase consideration in disposal group – – 109

Divestment of operations during the year incl. net debt transferred (Consolidated operating cash flow statement) 1,716 17,682 –151) Excludingreversalofrealizedtranslationdifferencesindivestedcompaniestoprofitorloss.Gain/losson

sale is included in items affecting comparability in profit or loss.

Note 3 –Acquisitionsanddivestments,cont.



4 Operating expenses by type of costs

Operating expenses by functionSEKm 2013 2012 2011

Cost of goods sold –67,006 –64,449 –61,701

Sales and administration expenses –12,285 –12,472 –11,981

Items affecting comparability –1,251 –2,634 –5,439

Total –80,542 –79,555 –79,121

Disposal group – – –23,165

Total including disposal group –80,542 –79,555 –102,286

See also page 114 for description of costs.

Operating expenses by type of costSEKm Note 2013 2012 2011

Otherincome 2,630 1,711 5,053

Change in net value of biological assets 12 574 643 623

Change in inventory of finished products and products in progress1) –338 –192 512

Raw materials and consumables1) –28,436 –28,310 –39,327

Personnel expenses1) 6 –16,610 –15,687 –20,228

Otheroperatingexpenses1) –33,729 –31,349 –37,684

Depreciation 7 –4,930 –4,926 –5,927

Impairments1) 7 –223 –623 –5,308

Revaluation of acquisitions 5642) 24 –

Loss on divestment 3 –443) –846 –

Total –80,542 –79,555 –102,2861) Including items affecting comparability.2) Remeasurementofpreviousequityportionatfairvalueinconjunctionwithacquisitionofupto51.4%of

Vinda,HongKong.3) Loss on divestment of publication paper mill in Laakirchen, Austria.

ITEMS AFFECTING COMPARABILITYItemsaffectingcomparability in2013 totaledSEK–1,251m.Of the total itemsaffectingcomparability,SEK–223mpertainstoimpairmentandSEK–1,028mtootheritems.ItemsaffectingcomparabilityincluderestructuringcoststotalingSEK963m(791;775),ofwhichSEK51m(205;396)relatedtoPersonalCare,SEK710m(332;291)toTissue,SEK158m(179;88)toForestProductsandSEK44m(75;–)tootheroperations.Oftheserestructur-ingcosts,SEK939m(683;595)pertainstorestructuringcostsbeingpaid,SEK119m(83;324)toimpairmentofnon-currentassets,SEK–m(12;–)toimpairmentofgoodwillandSEK24m(13;36)toimpairmentofworkingcapital,mainlyinventory.For2013,theitemRemeasurement of previous equity portion at fair value in conjunction with acquisition, totalingapositiveofSEK564m,pertainstoVinda.Restructuringcostsbeingpaidcom-prisepersonnelcostsintheamountofSEK765m(528;517)andotheroperatingexpensesofSEK174m(155;78).

OTHER INCOMEOther income includes income from activities or sales of goods and services outsideSCA’s core business. The income can be of a recurring or occasional nature. During 2013, salesofgoodsandservicesoutsideSCA’scorebusinessamountedtoSEK1,197m,reve-nue from SCA’s transport business amounted to SEK 727m and rental income amounted toSEK89m.IncomeofamoreoccasionalnatureamountedtoSEK882m,ofwhichSEK880m pertains to gains from the sale/exchange of non-current assets.

OTHER OPERATING EXPENSES

SEKm 2013 2012 2011

Transport expenses –7,085 –7,053 –8,614

Energy expenses1) –4,966 –4,828 –6,154

Purchased finished goods for onward sale –4,601 –3,034 –5,025

Marketingcosts –3,924 –3,807 –3,696

Repairs and maintenance –2,667 –2,497 –3,160

IT, telephony and lease of premises –1,293 –1,330 –2,153

Otheroperatingexpenses,production –3,468 –3,571 –3,591

Otheroperatingexpenses,distribution, sales and administration –4,460 –4,207 –4,245

Other –1,265 –1,022 –1,046

Total –33,729 –31,349 –37,684

Disposal group – – 7,396

Total excluding disposal group –33,729 –31,349 –30,2881) AfterdeductionforrevenuesfromenergyintheamountofSEK800m(913;929).

OTHER DISCLOSURESExchangeratedifferencestotalingSEK54m(95;252)areincludedinoperatingprofit.Gov-ernmentgrants received reducedoperatingexpensesbySEK49m (38;78).Costs forresearchanddevelopmentamountedtoSEK998m(845;832).

OPERATING LEASESFuture payment obligations in the Group of minimum leasing fees for non-cancellable operatingleasesaredistributedasfollows:

SEKm 2013 2012 2011

Within 1 year 557 570 1,452

Between2and5years 1,186 1,250 2,967

Laterthan5years 536 419 1,908

Total 2,279 2,239 6,327



Cost for the year related tooperating leasingof assets amounted toSEK692m (633;1,214). Leasing objects comprise a large number of objects, including energy plants, ware-houses, offices, other buildings, machinery and equipment, IT equipment, office fixtures and various transport vehicles. The assessment for a number of the objects is that, in real-ity, it is possible to terminate contracts early.

FINANCE LEASESFuture payment obligations in the Group of minimum leasing fees for finance leases are distributedasfollows:

SEKm 2013 2012 2011

Within 1 year 16 54 49

Between2and5years 45 57 118

Laterthan5years – 26 –

Total 61 137 167

Future expenses for finance leases –5 –21 –22

Present value of liabilities relating to finance leases 56 116 145

Disposal group

Within 1 year – – –25

Between2and5years – – –30

Laterthan5years – – –

Total – – –55

Future financial expenses for finance leases – – 7

Present value of liabilities relating to finance leases, disposal group – – –48

Total present value of liabilities relating to finance leases, excluding disposal group 56 116 97

TotalpaymentsforfinanceleasesduringtheyearamountedtoSEK55m(35;35).Duringtheyear,SEK4m(4;7)wasrecognizedasaninterestexpenseandSEK51m(24;18)asamortizationofdebt.DepreciationoffinanceleaseassetsduringtheyearamountedtoSEK18m(12;16).Thecarryingamountoffinanceleaseassetsatyear-endamountedtoSEK138m(165;120)relatingtobuildings/landandSEK13m(5;9)relatingtomachinery.

Forinformationaboutsignificantleasingcontracts,refertoNote33Contingentliabilities.

AUDITING EXPENSESRemunerationtoauditorscanbespecifiedasfollows:

SEKm 2013 2012 2011

PwC

Audit assignments –46 –57 –80

Auditing activities other than the audit assignment –2 –2 –3

Tax consultancy services –19 –19 –20

Otherassignments –34 –52 –36

Total PwC –101 –130 –139

Other auditors

Audit assignments –4 –4 –1

Tax consultancy services –3 –2 –8

Otherassignments –8 –9 –5

Total other auditors –15 –15 –14

Total –116 –145 –153

Disposal group – – –28

Total excluding disposal group –116 –145 –125



5 Segment reporting

SEKmPersonal

Care TissueForest

ProductsOther

operations Eliminations Total Group

2013 fiscal year

REVENUES

External sales 26,513 47,122 15,158 226 – 89,019

Internal sales 401 –135 367 –101 –532 0

Total revenues 26,914 46,987 15,525 125 –532 89,019

RESULT

Segment result 3,201 5,595 1,843 –705 – 9,934

Items affecting comparability –71 –656 –236 –288 – –1,251

Operating profit/loss 3,130 4,939 1,607 –993 – 8,683

Financial income 120

Financial expenses –1,120

Tax expense for the year –2,119

Net profit for the year 5,564

OTHER DISCLOSURES

Assets 17,326 68,331 49,733 3,042 –4,516 133,916

Holdingsinassociates 262 181 54 761 – 1,258

Unallocated financial assets 7,098

Total assets 17,588 68,512 49,787 3,803 –4,516 142,272

Investments/acquisitions –1,046 –7,968 –1,939 –63 – –11,016

Depreciation –988 –2,630 –1,253 –59 – –4,930

Expenses, in addition to depreciation, not matched by payments –1 –3 –1,164 2 – –1,166

SEKmPersonal

Care TissueForest

ProductsOther


2012 fiscal year

REVENUES

External sales 25,955 42,186 17,011 256 – 85,408

Internal sales 339 189 1,272 1,012 –2,812 0

Total revenues 26,294 42,375 18,283 1,268 –2,812 85,408

RESULT

Segment result 3,180 4,640 1,363 –537 – 8,646

Items affecting comparability –205 –678 –1,462 –289 – –2,634

Operating profit/loss 2,975 3,962 –99 –826 – 6,012

Financial income 91


Tax expense for the year –251

Profit from disposal group 503

Net profit/loss for the year 5,000

OTHER DISCLOSURES

Assets 17,375 57,664 48,416 3,385 –3,565 123,275

Holdingsinassociates 257 1,358 56 786 – 2,457


Total assets 17,632 59,022 48,472 4,171 –3,565 131,531

Investments/acquisitions –2,680 –15,268 –2,112 –178 – –20,238

Depreciation –983 –2,357 –1,526 –60 – –4,926

Expenses, in addition to depreciation, not matched by payments –67 74 –572 –224 – –789



SEKmPersonal

Care TissueForest

ProductsOther


2011 fiscal year

REVENUES

External sales 24,436 38,885 17,775 241 – 81,337

Internal sales 339 233 2,228 1,640 –4,440 0

Total revenues 24,775 39,118 20,003 1,881 –4,440 81,337

RESULT

Segment result 2,645 3,150 2,423 –480 – 7,738

Items affecting comparability –744 –597 –4,003 –95 – –5,439

Operating profit/loss 1,901 2,553 –1,580 –575 – 2,299

Financial income 129


Tax expense for the year –1,267

Profit from disposal group 900

Net profit for the year 607

OTHER DISCLOSURES

Assets 17,399 45,880 49,280 7,940 –9,445 111,054

Allocated to disposal group – – – – – 21,601

Holdingsinassociates 252 653 54 108 – 1,067


Total assets 17,651 46,533 49,334 8,048 –9,445 139,004

Investments/acquisitions –1,584 –2,366 –1,530 –1,4251) – –6,905

Depreciation –1,101 –2,210 –1,292 –1,3241) – –5,927

Expenses, in addition to depreciation, not matched by payments –14 91 –585 –931) – –6011) Including the packaging operations divested on June 30, 2012.

Items affecting comparability 2013 2012 2011

SEKm ExpensesImpair-ments Expenses

Impair-ments Expenses

Impair-ments

Personal Care –51 –20 –168 –37 –107 –637

Tissue –531 –125 –570 –108 51 –648

Forest Products –156 –80 –990 –472 –66 –3,937

Other –290 2 –283 –6 –93 –2

Total –1,028 –223 –2,011 –623 –215 –5,224

Net –1,251 –2,634 –5,439

Business Segments: SCA is a global leading hygiene and forest products company that develops and produces sustainable personal care, tissue and forest products. These product groups are the primary lines of business. Personal Care comprises three product segments and offers incontinence products, baby diapers and feminine care products. Tissue comprises consumer tissue and Away-from-Home (AfH) tissue encompassinghospitals, large workplaces, restaurants and hotels. Consumer tissue comprises toilet paper, kitchen paper, facial tissues, handkerchiefs and napkins. In AfH tissue, SCA develops and sells complete hygiene solutions comprising dispensers, tissue, soap, ser-vice and maintenance. Forest Products sells publication papers, packaging papers, pulp, solid-wood products and renewable energy. SCA has a well-integrated value chain in Sweden between its forest assets and production facilities. Pulp production contributes to the Group’s raw material integration, since the Group’s pulp is mainly delivered internally. In addition, the Group’s pulp is mainly produced from timber from the Group’s own forests, which also, to a large extent, supply the sawmills.

Assets and liabilities: The assets included in each business segment comprise all oper-ating assets used in the business segment, primarily trade receivables, inventories and non-current assets after deduction for operating liabilities andprovisions.Most of theassets are directly attributable to each business segment. In addition, some assets that are common to two or more business segments are allocated among the business seg-ments.

Intra-Group deliveries: Revenues, expenses and results for the various business seg-ments were affected by intra-Group deliveries. Internal prices are market-based. Intra-Group deliveries are eliminated when preparing the consolidated financial statements.

Customers: SCA has no customers from which it generates income that accounts for more than 10% of the company’s net sales. SCA’s ten largest customers account for 21% of of the company’s sales.



Group by countryNet sales Average number of employees Non-current assets1)

2013 2012 2013 Of whom women, %

2012 Of whom women, %

2013 2012

SEKm % SEKm % SEKm SEKm

Sweden 5,691 6 5,587 7 5,688 26 5,812 26 43,929 42,272

EU excl. Sweden

Germany 10,632 12 10,438 12 3,390 18 3,455 18 5,998 5,530

France 9,489 11 7,085 8 2,867 23 2,013 26 5,781 6,166

United Kingdom 9,036 10 9,084 11 1,857 18 1,846 19 4,569 4,591

Spain 5,316 6 4,817 6 1,173 24 1,042 25 3,589 3,602

Netherlands 3,173 4 2,976 3 1,386 15 1,268 16 2,897 2,239

Italy 3,082 3 3,573 4 787 22 775 22 2,067 2,616

Belgium 1,770 2 1,640 2 396 24 379 23 2,751 2,325

Finland 1,623 2 1,273 1 379 28 223 35 737 731

Austria 1,461 2 1,710 2 805 17 1,332 14 731 839

Denmark 1,395 2 1,188 1 89 63 87 65 1 2

Poland 810 1 811 1 596 24 591 25 869 813

Greece 791 1 780 1 76 37 117 32 76 232

Hungary 604 1 657 1 141 56 145 56 3 3

Portugal 560 1 409 1 27 63 31 58 67 65

CzechRepublic 535 0 560 1 71 59 69 61 0 1

Ireland 447 0 411 1 32 25 25 25 26 64

Romania 264 0 260 0 24 75 25 72 2 2

Slovakia 228 0 243 0 783 33 759 32 572 580

Lithuania 176 0 161 0 19 37 19 37 1 0

Rest of EU 614 1 608 1 14 79 13 85 1 1

Total EU excl. Sweden 52,006 59 48,684 57 14,912 22 14,214 22 30,738 30,402

Rest of Europe

Russia 3,037 3 2,935 3 1,201 43 1,166 45 2,425 2,178

Norway 1,770 2 1,825 2 161 61 220 50 1 84

Switzerland 1,231 1 1,202 1 28 46 24 50 82 83

Ukraine 263 0 276 1 77 48 72 53 5 5

Turkey 245 0 270 0 82 28 62 26 75 94

Other 468 2 436 1 6 33 8 38 – 0

Total, rest of Europe 7,014 8 6,944 8 1,555 44 1,552 45 2,588 2,444

Rest of world

US 8,253 9 8,868 10 2,539 25 2,651 25 6,695 6,864

Mexico 3,191 4 3,011 4 2,329 26 2,370 27 3,883 4,008

Colombia 1,722 2 1,811 2 1,492 31 1,388 35 1,192 1,271

Canada 1,321 1 1,097 1 269 34 301 39 277 330

Japan 1,240 1 1,537 2 57 77 57 74 2 3

Malaysia 1,022 1 1,013 1 1,268 59 1,330 58 786 877

Chile 904 1 762 1 590 16 475 13 862 939

China 684 1 399 1 794 60 614 59 9,368 372

Ecuador 550 1 477 1 522 35 481 35 95 83

Brazil 425 1 441 1 469 43 468 43 216 242

Costa Rica 397 1 392 1 80 45 81 46 2 2

HongKong 350 0 309 0 22 73 20 75 12 14

Taiwan 347 0 224 0 294 41 227 68 1,283 1,421

Singapore 252 0 183 0 30 70 34 68 8 8

Morocco 250 0 284 0 – – – – – –

Philippines 250 0 244 0 36 53 37 51 7 8

South Africa 213 0 247 0 64 45 95 58 33 43

Other 2,937 4 2,894 3 994 36 1,568 46 255 231

Total, rest of world 24,308 27 24,193 28 11,849 35 12,197 36 24,976 16,716

Total Group 89,019 100 85,408 100 34,004 28 33,775 29 102,231 91,8341) Non-currentassetsincludeGoodwill,Otherintangibleassets,Buildings,land,machineryandequipmentandBiologicalassets.

Note 5 –Segmentreporting,cont.



6 Personnel and Board costs

Personnel costsSEKm 2013 2012 2011

Salaries and remuneration 11,767 11,365 15,046

of which Group management 143 134 101

of which Board 6 6 5

Pension costs 1,140 970 958

of which defined benefit pension plans1) 562 257 261

of which defined contribution pension plans 578 713 697

Othersocialsecuritycosts 2,663 2,476 3,114

Otherpersonnelcosts 1,040 876 1,110

Total2) 16,610 15,687 20,228


Total excluding disposal group 16,610 15,687 14,5461) Theincreaseincostsfor2013ismainlyattributabletothenewaccountingrulesinIAS19,whichhave

been applied as of 2013.2) TotalpersonnelcostsincludeSEK765m(528;517)attributabletocostsforimplementedefficiency-

enhancement measures.

Average number of employees 2013 2012 2011

Average number of employees 34,004 33,775 43,697

of whom women 28% 29% 27%

Numberofcountries 61 62 58

Women comprised 21% (21; 18) of the total number of Board members and senior executives.

Breakdown of employees by age groups, %2013 21–30 yrs 31–40 yrs 41–50 yrs 51–60 yrs

18% 28% 29% 20%

2%(2;2)oftheemployeesareundertheageof20,and3%(2;3)areovertheageof60.During2013,SCAinvestedapproximatelySEK103m(100;151)orSEK3,000(3,000;

3,500)peremployeeinskills-enhancementactivities.Theaddedvalueperemployeein2013amountedtoSEK713,000(617,000;519,000).

Theproportionofuniversitygraduatesamountstoabout20%(18;16).In 2013, 5,143 (3,993; 5,207) people leftSCAwhile 4,426 (6,344; 4,809) joined the

Group.Thesefiguresincludebothvoluntaryretirementandtheeffectsofrationalizationactivities and retirements. In addition, a significant portion relates to summer jobs for stu-dents and seasonal work.

FEES TO BOARD MEMBERS IN THE PARENT COMPANY DURING THE YEAR Members of the Board elected by the AGMwho are not employees in the companyreceivedthefollowingremunerationin2013inaccordancewiththeAGMresolution.

SEK Board feeAudit

Committee feeRemuneration Committee fee Total

SverkerMartin-Löf (Chairman) 1,650,000 130,000 135,000 1,915,000

Pär Boman 550,000 550,000

RolfBörjesson 550,000 105,000 655,000

Jan Johansson – –

Leif Johansson 550,000 105,000 655,000

Louise Julian Svanberg 550,000 550,000

BertNordberg 550,000 550,000

AndersNyrén 550,000 175,000 725,000

BarbaraMilianThoralfsson 550,000 130,000 680,000

Total 5,500,000 435,000 345,000 6,280,000

REMUNERATION OF SENIOR EXECUTIVESSeniorexecutivesrefertothePresident,whoisalsotheCEO,theExecutiveVicePresi-dents,BusinessUnitPresidentsandequivalents,andtheCentralStaffManagers.Forthecompositionofthisgroup,seepages58–59.

AGM guidelines for remuneration of senior executivesThe2013AnnualGeneralMeetingadoptedthefollowingguidelinesforremunerationofsenior executives.

“RemunerationoftheCEOandotherseniorexecutiveswillbeafixedamount,possiblevariableremuneration,additionalbenefitsandpension.Otherseniorexecutives includetheExecutiveVicePresidents,BusinessUnitPresidentsandequivalents,andtheCentralStaffManagers.Thetotalremunerationistocorrespondtomarketpracticeandbecom-petitive in the senior executive’s field of profession. Fixed and variable remuneration are to belinkedtothemanager’sresponsibilityandauthority.FortheCEO,aswellasforothersenior executives, the variable remuneration is to be limited and linked to the fixed remu-neration. The variable remuneration is to be based on the outcome of predetermined objectives and, as far as possible, be linked to the increase of value of the SCA share, from which the shareholders benefit. Programs for variable remuneration should be formulated so that the Board, if exceptional circumstances prevail, has the possibility to limit, or refrain from, payment of variable remuneration if such an action is considered reasonable and in compliance with the company’s responsibility to shareholders, employees and other stakeholders.

In the event of termination of employment, the notice period should normally be two years if termination is initiated by the company, and one year, when initiated by the senior executive. Severance pay should not exist.

Pension benefits are to be either defined benefit or defined contribution plans, or a combinationofboth,andentitletheseniorexecutivetopensionfromtheageof60,attheearliest. To earn the pension benefits, the period of employment must be long-term, at present 20 years. When resigning before the age providing entitlement to pension, the seniorexecutivewillreceiveapaid-uppensionpolicyfromtheageof60.Variableremuner-ationisnotpensionableincome.Mattersofremunerationoftheseniormanagementaretobe dealt with by the Remuneration Committee and, as regards the President, be resolved by the Board of Directors.”

Company’s application of guidelinesThecompanyappliedtheguidelinesapprovedbytheAGMinthefollowingmanner.

Fixed salaryThe fixed salary is to be in proportion to the individual’s position and the authority and responsibilities this entails. It is set individually at a level that, combined with other remu-neration, is assessed as a market rate and competitive in the labor market in which the executive works.

Variable remunerationVariable remunerationof theCEO,ExecutiveVicePresidentsandBusinessUnitPresi-dentsandequivalentsismaximizedtoatotalof100%ofthefixedsalary.ForoneBusinessUnit President, stationed in the US, the maximum outcome is 130%, while the correspond-inglimitforotherseniorexecutivesis90%.

The program for variable remuneration is divided into a short and long-term portion. Theshort-termportion(Short-termIncentive,orSTI)fortheCEO,ExecutiveVicePresi-dentsandBusinessUnitPresidentsandequivalentsmayamounttoamaximumof50%offixed salary. For one Business Unit President, stationed in the US, the maximum outcome is 80%, while the corresponding limit for other senior executives is 40%. The STI goals set for the Business Unit Presidents are mainly based on operating cash flow, cost control, operatingprofitandgrowthforeachbusinessunit,whilethegoalfortheCEOandothersreporting directly to him is based primarily on the Group’s profit before tax and operating cash flow. Furthermore, a non-financial goal also applies accounting for 20% of the vari-able remuneration.

Thelong-termportion(Long-TermIncentive,orLTI)mayamounttoamaximumof50%of the fixed salary. In return, the senior executive must invest half of the variable LTI com-pensation, after tax withholdings, in SCA shares. The shares may then not be sold before the end of the third calendar year after entry into the relevant LTI program. The established LTI goal is based on the performance of the company’s B share, measured as the TSR (Total Shareholder Return) index, compared with a weighted index of competitors’ and consumer companies’ shares performance (TSR) over a three-year period. The structure of the LTI was approved by the Board in 2003.



Outcome, variable remunerationFor the CEO, Executive Vice Presidents and Central Staff Managers, STI resulted in35–46%offixedsalaryfor2013.STIresultedinvariableremunerationcorrespondingto12–53%offixedsalaryfortheBusinessUnitPresidents.TheLTItargetwasachievedfor2011–2013,resultinginmaximumoutcomefortheCEOandotherseniorexecutives.

Other benefitsOtherbenefitspertain,insomecases,toacompanycar,housingandschoolfees.

PensionFortheCEO,whoisentitledtoretireattheageof60,thepensionagreementprovidesaretirement pension (excluding national pension benefits and previously earned paid-up pol-icies)betweentheageof60and65ofapproximately40%offinalsalary(excludingvariableremuneration) and thereafter of approximately 20% of final salary (excluding variable remu-neration) for life. Upon termination of employment prior to retirement age, a paid-up policy is receivedforpensionpaymentsfromage60.Inaddition,beneficiaries’pensionamountstoapproximately50%ofretirementpensioninthecaseofdeathbeforetheageof65andthereafter to 30% of the retirement pension (including previously earned paid-up policies).

MostoftheotherseniorexecutivesintheGrouphaveacombinationofdefinedbenefitand defined contribution pension plans that entitle the executives, on reaching the age of 60,toreceivearetirementpension(includingnationalpensionbenefits)ofupto45%oftheaverage salary (excluding variable remuneration) for three years prior to retirement age. For full pension, the individual must have been employed for at least 20 years calculated from 40 years of age. Upon termination of employment prior to reaching retirement age, a paid-uppolicyisreceivedforpensionpaymentsfromage60,onconditionthattheexecutive,after reaching the age of 40, has been employed in the Group for at least three years. In addition,beneficiaries’pensionamountstoabout50%ofretirementpension.Inadditionto the defined benefit pension, a pension is paid based on premiums paid by the company. The premiums paid for each year of service amount to 10% of the executive’s base salary and are invested in a fund or traditional insurance chosen by the executive.

Some senior executives have a pension plan, which is closed to new entrants, that is a definedbenefit pensionplan,whichgrants the executive the right at the ageof 65 toreceive a pension (including national pension benefits) at up to 70% of the salary (excluding variablesalary).However,theyareentitledtoretireat60with70%ofthefinalsalaryatretirement(excludingvariableremuneration),between60and65andsubsequentlywith50%ofthesalaryatretirement(excludingvariableremuneration).Normally,fullpensionrequires the executive to have been employed in the Group for 20 years. Upon termination of employment prior to reaching retirement age, a paid-up policy is received for pension paymentsfromage65or60,onconditionthattheexecutive,afterreachingtheageof40,has been employed in the Group for at least three years. In addition, beneficiaries’ pension amountstoabout50%ofretirementpension.

Two senior executives have a defined contribution pension plan (in addition to national pensionbenefits) intowhichthecompanypays30–40%oftheexecutives’fixedsalary,which is invested in funds or traditional insurance.

TwoseniorexecutivesareemployedincompaniesoutsideSweden.Oneexecutiveisencompassed by the defined contribution pension plan that applies to employees in the US.Oneexecutiveisencompassedbythedefinedbenefitpensionplanthatappliestoemployees in Belgium.

Notice period and severance payTheagreementwiththeCEOstipulatesaperiodofnoticeofterminationoftwoyearsifsuchnoticeisgivenbythecompany.TheCEOhasacorrespondingrightwithaperiodofterminationofoneyear.Ifnoticeisgivenbythecompany,theCEOisnotobligatedtoserveduring the notice period. The agreement does not contain any stipulations with regard to severance pay. Between the company and other senior executives, a period of notice of termination of one to two years normally applies, if such notice is given by the company. The executive has a corresponding right with a period of notice of termination of six months to one year. The executive is normally expected to be available to the company during the notice period. The agreements have no stipulations with regard to severance pay.

Preparation and decision process for remunerationDuring the year, the Remuneration Committee submitted recommendations to the Board regarding the principles for remuneration of senior executives. The recommendations encompassedtheratiobetweenfixedandvariableremunerationandthesizeofanysalaryincreases. In addition, the Remuneration Committee proposed criteria for assessing vari-able remuneration and pension terms. The Board discussed the Remuneration Commit-tee’s proposal and decided on the basis of the Committee’s recommendations. The remu-neration of senior executives for the 2013 financial year was based on the Remuneration Committee’srecommendationand,withregardtotheCEO,decidedbytheBoard.Theexecutives concerned did not participate in remuneration matters pertaining to them-selves. When it was deemed appropriate, the work of the Remuneration Committee was carried out with the support of external expertise. For information about the composition oftheRemunerationCommittee,seepage51.

The Board’s proposal for new guidelinesTheBoardhasdecidedtoproposetothe2014AnnualGeneralMeetingtheunchangedguidelines for determining salaries and other remuneration for senior executives. With the salary situation prevailing in 2014 and an unchanged number of senior executives, the maximum outcome of variable remuneration could entail a cost for the Group, excluding social security costs, of approximately SEK 80m.

Remuneration and other benefits during the yearSEK Fixed salary Variable remuneration Other benefits Total salary and remuneration

CEOJanJohansson 10,962,121 10,318,000 160,080 21,440,201

Otherseniorexecutives(16people) 62,836,453 56,029,602 10,755,315 129,621,370

Total 73,798,574 66,347,602 10,915,395 151,061,571

SEK Pension costs

CEOJanJohansson 8,018,773

Otherseniorexecutives(16people) 28,759,616

Total 36,778,389

Comments to the tables:• Variableremunerationcoversthe2013fiscalyearbutispaidin2014.• Pensioncostspertaintothecoststhataffectedprofitfortheyear,excludingspecialpayrolltax.

Note 6 –PersonnelandBoardcosts,cont.



7 Depreciation/amortization and impairment of property, plant and equipment, and intangible assets

SEKm 2013 2012 2011

Depreciation

Buildings 643 608 835

Land 131 119 114

Machinery and equipment 3,870 3,920 4,675

Sub-total 4,644 4,647 5,624

Patents, trademarks and similar rights 268 259 272

Capitalized development costs 18 20 31

Sub-total 286 279 303

Total 4,930 4,926 5,927

Impairment losses

Buildings – 24 53

Land 1 9 40

Machinery and equipment1) 118 501 225

Construction in progress – 0 6

Sub-total 119 534 324

Goodwill – 89 4,910

Patents, trademarks and similar rights – – 74

Emission allowances 8 – –

Capitalized development costs 32 – –

Sub-total 40 89 4,984

Total1) 159 623 5,308

Total


Land 132 128 154

Machinery and equipment 3,988 4,421 4,900

Construction in progress – 0 6

Sub-total 4,763 5,181 5,948

Goodwill – 89 4,910

Patents, trademarks and similar rights 268 259 346

Emission allowances 8 – –

Capitalized development costs 50 20 31

Sub-total 326 368 5,287

Total 5,089 5,549 11,235


Total excluding disposal group 5,089 5,549 10,3201) The total Impairment losses includes reversal of impairment for machinery and equipment of SEK –m (–; 62).

Depreciation/amortization is based on the costs and estimated useful lives of the assets outlined in the accounting principle section on page 76.

8 Financial income and expenses

SEKm 2013 2012 2011

Results from shares and participations in other companies

Dividend 63 48 44

Capital gains/losses, impairment losses – – –

Interest income and similar profit/loss items

Interest income, investments 57 39 72

Other financial income 0 4 20

Total financial income 120 91 136

Interest expenses and similar profit/loss items

Interest expenses, borrowing –1,238 –1,342 –1,370

Interest expenses, derivatives 191 37 14

Fair value hedges, unrealized –3 6 –8

Other financial expenses –70 –56 –62

Total financial expenses –1,120 –1,355 –1,426

Total –1,000 –1,264 –1,290


Total excluding disposal group –1,000 –1,264 –1,325

Other financial income and expenses include a negative exchange difference of SEK 7m (pos: 4; pos: 20).

If interest rate levels had been 1 percentage point higher/lower, with unchanged fixed-interest terms and volumes in the net debt, interest expenses for the year would have been SEK 59m (178; 177) higher/lower. Sensitivity analysis calculations have been performed on the risk to which SCA was exposed at December 31, 2013 using assumptions on market movements that are regarded as reasonably possible in one year’s time.

For a description of how SCA manages its interest rate risk, refer to page 65 of the Board of Directors’ Report.



9 Income taxes

TAX EXPENSE

SEKm 2013 2012 2011

Current tax expense 2,005 1,154 1,142

Deferred tax expense 114 –903 509

Total 2,119 251 1,651


Total excluding disposal group 2,119 251 1,267

Tax expense amounted to 27.6% (5.3; 73.1) of the Group’s profit before tax. The difference between the recognized tax expense and expected tax expense is explained below. The expected tax expense is calculated according to current profit levels in each country.

2013 2012 2011

SEKm % SEKm % SEKm %

Tax expense including disposal group 2,119 27.6 251 5.3 1,651 73.1

Expected tax expense 1,912 24.9 1,135 23.9 435 19.3

Difference 207 2.7 –884 –18.6 1,216 53.8

The difference is explained by:

Permanent effects1)

Effects of subsidiary financing –27 –0.4 –82 –1.7 –139 –6.2

Goodwill impairment and currency impact2) – – – – 1,231 54.5

Effects of acquisitions and divestments3) –124 –1.6 437 9.2 – –

Other permanent effects4) 210 2.8 –188 –4.0 –18 –0.8

Taxes related to prior years5) 113 1.5 246 5.2 86 3.8

Changes in unrecognized deferred tax assets6) 41 0.5 34 0.7 76 3.4

Changes in tax rates7) –6 –0.1 –1,331 –28.0 –20 –0.9

Total 207 2.7 –884 –18.6 1,216 53.81) Permanent effects are attributable to permanent differences between the accounting and taxable result. 2) The effects of goodwill impairment and currency impact in 2011 pertain to the divestments of the

packaging operations and 50% of the operation in Australasia.3) The effect for 2013 is related to acquisition of shares in Vinda. The effect for 2012 concerns capital losses

on shares attributable to the divestment of the newsprint mill in Aylesford, UK and effects relating to the divestment of 50% of the operation in Australasia.

4) The effects for the year include tax expenses of SEK 49m related to profit-taking within the Group. 2012 includes SEK 28m and 2011 includes SEK 35m in tax expenses for corresponding profit-taking.

5) Income taxes related to prior years recognized in 2013 primarily pertain to effects in Germany and Mexico, which increased the tax expense by SEK 92m. The effect in 2012 relates essentially to a provision for tax risk in Denmark, which increased the tax expense by SEK 236m. 2011 primarily concerns impairment of tax assets belonging to the operation in Australia.

6) Change in unrecognized deferred tax assets in 2011 includes SEK 43m relating to the operation in UK. 7) The changes in tax rates in 2013 primarily relate to the revaluation of deferred taxes due to a corporate tax

rate decrease in Finland. 2012 relates essentially to the effect of the corporate tax rate decrease in Sweden. The changed tax rates in 2011 primarily relate to a corporate tax rate decrease in the UK.

CURRENT TAX

Current tax expense (+), tax income (–)SEKm 2013 2012 2011

Income tax for the year 1,904 1,177 1,125

Adjustments for prior years 101 –23 17

Total 2,005 1,154 1,142


Total excluding disposal group 2,005 1,154 871

Current tax liability (+), tax asset (–) The change during the year to the current tax liability is explained below:

SEKm 2013 2012 2011

Value at January 1 –139 –130 –159

Current tax expense 2,005 1,154 1,142

Paid tax –1,634 –1,193 –961

Other changes 91 31 –3

Translation differences 5 –1 –3

Allocated to disposal group – – –146

Value at December 31 328 –139 –130

Other changes relate to effects of acquisitions and divestments in the amount of SEK 91m (31; –3). The closing current tax liability comprises tax assets of SEK 417m (517; 377) and tax liabilities of SEK 745m (378; 247).

DEFERRED TAX

Deferred tax expense (+), tax income (–)SEKm 2013 2012 2011

Changes in temporary differences 97 186 453

Adjustments for prior years 12 269 69

Other changes 5 –1,358 –13

Total 114 –903 509


Total excluding disposal group 114 –903 396

Other changes include the effects of changed tax rates, which reduced the deferred tax expense by SEK –6m (–1 331; –20), revaluation of deferred tax assets, which increased the deferred tax expense by SEK 11m (0; 7) and capitalization of tax assets related to the right to future tax deductions of SEK 0m (–27; 0).

Deferred tax liability (+), tax asset (–) The change during the year to the deferred tax liability is explained below:

SEKmValue at

January 1Deferred

tax expenseOther

changes

Trans-lation dif-ferences

Value at Decem-

ber 31

Intangible assets 969 –380 389 14 992

Land and buildings 7,243 396 30 44 7,713

Machinery and equipment 3,421 628 161 34 4,244

Financial non-current assets –186 –52 51 –4 –191

Current assets 189 –453 359 4 99

Provisions for pensions –943 –157 544 –12 –568

Other provisions –139 –166 189 –8 –124

Liabilities –541 115 –264 –2 –692

Tax credits and tax loss carryforwards –1,653 203 –372 –10 –1,832

Other –71 –20 17 –2 –76

Total 8,289 114 1,104 58 9,565

Other changes include deferred tax recognized directly in equity according to IAS19 of SEK 500m, IAS39 of SEK 131m, effects of acquisitions and divestments of SEK 283m and change in tax risk provisions of SEK 190m. The closing deferred tax liability comprises deferred tax assets of SEK 867m (818; 715) and deferred tax liabilities of SEK 10,432m (9,107; 9,350).

LOSS CARRYFORWARDSLoss carryforwards for which deferred tax assets were recognized have been reported at the tax amount on the line Tax credits and tax loss carryforwards in the table Deferred tax liability, deferred tax asset above.

Loss carryforwards for which no deferred tax assets were recognized amounted to SEK 2,529m (3,378; 1,699) at December 31, 2013. Of these, SEK 163m have an indefinite life. The remainder expire as follows:

Year SEKm

2014 16

2015 8

2016 10

2017 427

2018 and later 1,905

Total 2,366

During 2013, uncapitalized loss carryforwards amounting to SEK 8m expired and SEK 1,313m were either utilized or capitalized. The tax value of unrecognized tax loss carry-forwards amounted to SEK 774m.

OTHERSCA recognizes no deferred tax relating to temporary differences attributable to invest-ments in subsidiaries, associated companies and joint ventures. Any future effects (tax deducted at source and other deferred tax on profit-taking within the Group) is reported when SCA can no longer control reversal of such differences or when, for other reasons, it is no longer improbable that reversal can take place in the foreseeable future.



10 Intangible assets

Goodwill TrademarksLicenses, patents and similar rights Capitalized development costs

SEKm 2013 2012 2011 2013 2012 2011 2013 2012 2011 2013 2012 2011

Accumulated costs 11,942 12,258 15,481 4,297 4,440 1,806 2,646 2,988 3,084 270 268 473

Accumulated amortization – – – –71 –35 –20 –1,903 –2,098 –2,252 –179 –171 –327

Accumulated impairment –89 –89 –3,962 –57 –57 –56 –7 –13 –8 –34 –1 –21

Acquisition of Vinda, see Note 3 1,777 – – 2,940 – – 12 – – – – –

Total 13,630 12,169 11,519 7,109 4,348 1,730 748 877 824 57 96 125

Allocated to disposal group – – –2,086 – – – – – –112 – – –62

Total excluding disposal group 13,630 12,169 9,433 7,109 4,348 1,730 748 877 712 57 96 63

Value at January 1 12,169 9,433 17,688 4,348 1,730 1,992 877 712 894 96 63 164

Investments – – – – – – 90 75 115 12 10 11

Sales and disposals – – – – – – – –1 – – – 0

Business combinations 1,753 3,353 314 2,889 2,695 100 12 365 – – – –

Company divestments –8 –168 –53 –28 – – – 0 –1 – – –

Reclassifications –387 –81 –1,408 –165 –52 –218 –3 –27 84 – 42 –20

Amortization for the year – – – –30 –20 –10 –238 –239 –263 –18 –20 –31

Impairment for the year – –89 –4,910 – – –74 – – – –32 – –

Translation differences 103 –279 –112 95 –5 –60 10 –8 –5 –1 1 1

Value at December 31 13,630 12,169 11,519 7,109 4,348 1,730 748 877 824 57 96 125

Allocated to disposal group – – –2,086 – – – – – –112 – – –62

Value at December 31 excluding disposal group 13,630 12,169 9,433 7,109 4,348 1,730 748 877 712 57 96 63

Business combinations for the year primarily comprise the acquisition of the Chinese tis-sue company Vinda (see Note 3).

IMPAIRMENT TESTINGGoodwill is tested for impairment every year. Goodwill is distributed among business seg-ments as follows:

Goodwill by business segment

SEKmAverage WACC

2013, % 2013 2012 2011

Personal Care 7.1 2,849 2,804 508

Tissue 6.1 10,744 8,600 8,125

Forest Products 5.9 37 38 205

Other operations 5.9 – 727 595

Total 13,630 12,169 9,433

The recoverable amount for each cash-generating unit is determined based on a calcula-tion of value in use. These calculations are based on the strategic plans adopted by Group management for the next ten years. Assumptions in strategic plans are based on current market prices and costs with an addition for real price reductions and cost inflation as well as assumed productivity development. Volume assumptions follow the Group’s target of an average annual growth of 3 to 4%, depending on business segment and geographic market. Effects of expansion investments are excluded when goodwill is tested for impair-ment. Anticipated future cash flows, according to strategic plans, form the basis of the cal-culation of the recoverable amount. Sustained growth of 2% has been used in the calcula-tion. Cash flows for the period beyond ten years are calculated by an operating surplus multiple being applied to estimated sustained cash flow. In a present value calculation of anticipated future cash flows, the current weighted cost of capital (WACC) decided for each area within the Group at that time is applied. Discounted cash flows are compared with the carrying amount of capital employed per cash-generating unit and an impairment requirement may exist if the discounted cash flow is less than the carrying amount of capi-tal employed. Since the calculation of the recoverable amount is based on Group Management’s strategic plans for the next ten years, the calculated amount may deviate from the amount received if immediately divested. Testing for impairment is carried out in the fourth quarter and testing for 2013 showed that no impairment of remaining goodwill was needed. The sensitivity analysis shows that reasonable changes to key parameters do not give rise to any impairment. In 2013, goodwill previously specified as Other opera-tions was allocated to Personal Care and Tissue.

In addition to goodwill, there are acquired trademarks in the Group that are judged to have an indefinite useful life. The useful life is judged as indefinite when it relates to well-established trademarks within their respective markets which the Group intends to retain and further develop. The trademarks identified and measured relate to the 2013 acquisi-tion of the Chinese tissue company Vinda, the 2012 acquisition of Georgia-Pacific’s Euro-pean tissue operations, the 2012 acquisition of the Asian hygiene company Everbeauty, the 2012 acquisition of the remaining 50% shareholding in the Chilean hygiene company PISA, the 2011 acquisition of personal care operations in Brazil, the 2010 acquisition of personal care operations in South America, the 2007 acquisition of the European tissue operations and the 2004 acquisitions in Mexico and Malaysia. The cost of the trademarks was established at the time of acquisition according to the so-called relief from royalty method. The need for impairment is tested every year. Testing is carried out during the fourth quarter and is performed for each trademark or group of trademarks. An evaluation is made of the royalty rate determined at the time of acquisition as well as assessed future sales development over ten years. A multiple is used for time beyond ten years. This is dis-counted with the current weighted cost of capital (WACC) for each market. Testing for the year of the carrying amount of trademarks in the 2013 accounts showed no impairment need for trademarks. At year-end, the value of SCA’s trademarks with an indefinite useful life amounted to SEK 6,893m (4,274; 1,725).



11 Property, plant and equipment

Buildings Land Machinery and equipment Construction in progress

SEKm 2013 2012 2011 2013 2012 2011 2013 2012 2011 2013 2012 2011

Accumulated costs 18,303 17,406 21,634 6,865 6,604 6,826 70,966 70,124 84,930 3,318 3,879 4,160

Accumulated depreciation –7,711 –7,494 –9,760 –1,530 –1,445 –1,418 –41,490 –40,870 –51,166 – – –

Accumulated impairment –217 –214 –389 –51 –49 –76 –901 –1,231 –1,168 –8 –8 –6

Acquisition of Vinda, see Note 3 867 – – – – – 3,392 – – – – –

Total 11,242 9,698 11,485 5,284 5,110 5,332 31,967 28,023 32,596 3,310 3,871 4,154

Allocated to disposal group – – –2,941 – – –911 – – –6,341 – – –775

Total excluding disposal group 11,242 9,698 8,544 5,284 5,110 4,421 31,967 28,023 26,255 3,310 3,871 3,379

Value at January 1 9,698 8,544 12,216 5,110 4,421 5,533 28,023 26,255 33,552 3,871 3,379 4,866

Investments 648 126 286 214 258 141 1,926 1,574 2,594 2,504 3,001 2,801

Sales and disposals –14 –4 –13 –3 –7 –88 –67 –35 –62 –34 –7 –3

Business combinations 861 1,738 0 – 896 0 3,330 3,940 361 – 110 1

Company divestments –4 –60 –68 –24 –149 –9 –29 –269 –16 – –7 0

Reclassifications1) 580 180 75 67 –106 –68 2,529 1,564 1,300 –2,996 –2,583 –3,402

Depreciation for the year –643 –608 –835 –131 –119 –114 –3,870 –3,920 –4,675 – – –

Impairment for the year – –24 –53 –1 –9 –40 –118 –501 –225 – 0 –6

Translation differences 116 –194 –123 52 –75 –23 243 –585 –233 –35 –22 –103

Value at December 31 11,242 9,698 11,485 5,284 5,110 5,332 31,967 28,023 32,596 3,310 3,871 4,154

Allocated to disposal group – – –2,941 – – –911 – – –6,341 – – –775

Value at December 31 excluding disposal group 11,242 9,698 8,544 5,284 5,110 4,421 31,967 28,023 26,255 3,310 3,871 3,3791) Reclassifications in 2013 were largely the result of the finalization of the previously preliminarily recognized purchase price allocation for Georgia-Pacific during the year, refer to Note 3.

Acquisitions for the year primarily comprise the acquisition of Vinda (see Note 3). During the year, SEK –m (–; 9) pertaining to interest during the construction period was

capitalized in Buildings, SEK 23m (19; 18) was capitalized in Machinery and equipment and SEK 1m (8; 28) was capitalized in Construction in progress, at an average interest rate of 3% (4; 4).

EMISSION ALLOWANCESThe SCA Group participates in the European system for emission allowances. SCA recei-ves a permit from each country in which operations requiring a permit are conducted, to emit a specific volume of carbon dioxide during a calendar year. At year-end 2013, surplus emission allowances not required to cover the provision for emissions were adjusted downward by SEK 0m (–7; –19) to the current market price on the balance sheet date. In conjunction with this, the deferred income was also reversed by a corresponding amount so that the net cost for the revaluation is zero. Settlement with each government regarding 2013 emissions will take place in April 2014.

SEKm 2013 2012 2011

Accumulated costs 117 146 195

Accumulated revaluation of surplus 0 –7 –19

Total 117 139 176


Total excluding disposal group 117 139 124

Value at January 1 139 124 220

Emission allowances received 70 93 237

Purchases 1 29 –

Sales –26 –5 –91

Business combinations – 17 –

Company divestments 0 –14 –

Reclassifications 0 –1 –

Impairment –8 – –

Settlement with the government –63 –102 –170

Revaluation of surplus 0 1 –20

Translation differences 4 –3 0

Value at December 31 117 139 176


Value at December 31 excluding disposal group 117 139 124

Note 10 – Intangible assets, cont.



12 Biological assets

SCA’s forest assets are divided up and reported as biological assets, that is, standing forest, and land assets. Standing forest is recognized at fair value according to IAS 41 and IFRS 13, and amounted at December 31, 2013 to SEK 28,767m (27,503; 26,729). In accordance with IFRS 13, this measurement is classified as a Level 3 input. The total value of SCA’s forest assets was SEK 29,740m (28,426; 27,652). The difference of SEK 973m (923; 923) comprises forestland reported under non-current assets Land.

Standing forestSEKm 2013 2012 2011

Value at January 1 27,503 26,729 26,069

Purchases and forest swaps 775 154 40

Sales –85 –23 –3

Change due to growth 1,733 1,607 1,616

Change due to felling –1,159 –964 –993

Value at December 31 28,767 27,503 26,729

Deferred tax related to standing forest 6,329 6,051 7,030

In the income statement, changes due to growth and felling are recognized as a net value, SEK 574m (643; 623).

The annual valuation of standing forest was carried out during the fourth quarter of the year. The same valuation method used in 2011 and 2012 was applied in 2013.

The valuation was founded on the felling plan which was based on forest tax assess-ments performed in 2006–2007. No change was made in the WACC, which amounted to 6.25%, in the 2013 valuation and the valuation in the fourth quarter did not result in any adjustment to the planned change in fair value of forest assets recognized on an ongoing basis during the year.

SCA’s forest holdings comprise approximately 2.6 million hectares of forestland prima-rily in northern Sweden, of which approximately 2.0 million is productive forestland. The forest portfolio amounts to 213 million cubic meters of forest (m3fo) and is divided into pine 43%, spruce 39%, deciduous 13% and contorta 5%. Average growth amounts to approx-imately 3.9 m3fo per hectare and year. Felling in 2013 amounted to approximately 4.7 mil-lion m3sub. Approximately 50% of the holdings comprise forest less than 40 years old, while about 60% of timber volume is in forests that are more than 80 years old.

2013 2012 2011

Value/hectare productive forestland, SEK 14,397 13,765 13,177

Value timber supplies SEK/m3fo 135 130 128

Sensitivity analysis

Change assumptionChange in value before tax, SEKm

WACC + / – 0.25% + / – 1,732

Wood price + / – 0.50% per year 2014–2023 + / – 2,197

Felling + / – 0.50% per year 2014–2023 + / – 549

Volume (felling and thinning) + / – 150,000 m3sub 2015–2035 + / – 718

Value trend, standing forest 2013

Forest area Timber volume Forest portfolio

26,000

27,000

28,000

29,000

30,000

Värde vid årets slutFörändring till följd av avverkningFörändring till följd av tillväxtFörsäljningInköpVärde vid årets början

Value

at D

ecem

ber 3

1

Chang

e due

to fe

lling

Chang

e due

to gr

owth

Sales

Purcha

ses

Value

at Ja

nuary

1

SEKm

Proportion younger than 40 yrs, 50% Proportion older than 80 yrs, 60%

Spruce, 39%

Deciduous, 13%

Contorta, 5%

Pine, 43%



13 Holdings in associates and joint ventures recognized in accordance with the equity method

SEKm 2013 2012 2011

Associates

Value at January 1 1,439 1,067 1,021

Investments 66 1,395 358

Remeasurement effect upon changes in holdings in subsidiaries 89 – –

Divestments –8 – –

Net increase in associates for the year1) 123 133 64

Reclassifications, joint ventures or subsidiaries –1,438 –1,106 239

Impairment for the year – – –20

Translation differences –9 –50 7

Value at December 31 262 1,439 1,669


Value at December 31 excluding disposal group 262 1,439 1,067

Joint ventures recognized in accordance with the equity method

Value at January 1 1,018 – –

Investments 10 1,018 –

Net increase in joint ventures for the year1) –50 – –

Translation differences 18 – –

Value at December 31 996 1,018 –

Value at December 31, associates and joint venture 1,258 2,457 1,0671) Net increase for the year includes the Group’s share of associates/joint ventures’ profit after tax and any

non-controlling interests as well as adjustment for dividends received during the year.

AssociatesInvestments refer primarily to an associate of Vinda (see Note 3). The remeasurement effect pertains to the former wholly owned company Bunzl & Biach, 51% of which was included in the sale of the Laakirchen publication paper mill. Reclassifications refer to Vinda, in which SCA has a 51% holding as of December 31, 2013. Vinda is consolidated as a wholly owned subsidiary.

The Group’s total receivables from associates at December 31, 2013 amounted to SEK 55m (42; 40), of which SEK 0m (0; 2) was interest-bearing. The Group’s total liability to associates at December 31, 2013 amounted to SEK 4m (6; 4), of which SEK 0m (0; 2) was interest-bearing.

14 Shares and participations

SEKm 2013 2012 2011


Increase through acquisition of subsidiaries – 1 7

Divestments –8 –5 –1

Other reclassifications – – –6

Impairment – –4 –3

Translation differences – –1 –1



Value at December 31 excluding disposal group 52 60 69

Shares and participations pertain to holdings in other companies that are not classified as subsidiaries, joint ventures or associates. Since these holdings are of an operating nature, the holdings are not classified as available-for-sale financial assets. Carrying amounts concur with fair value.

The Group’s holdings in major subsidiaries, joint ventures and associates are specified in Note 16.



15 Joint ventures

Joint ventures, that is, companies that SCA owns together with other parties and in which the parties by agreement exercise joint control, are usually consolidated according to the proportional method. A small number of companies are consolidated according to the equity method (see Note 13). Most of the joint ventures operate within the hygiene area, mainly in Latin America.

SCA’s share of income statement and balance sheet items as well as the average num-ber of employees in joint ventures consolidated according to the proportional method are set out below:

SEKm 2013 2012 2011

Income statement

Net sales 4,661 4,969 5,434

Cost of goods sold –3,350 –3,642 –4,408

Gross profit 1,311 1,327 1,026

Sales and administration expenses –833 –908 –1,175

Operating profit/loss 478 419 –149

Financial items –40 –47 –76

Profit/loss before tax 438 372 –225

Tax –110 –129 –40

Net profit/loss for the year 328 243 –265


Net profit/loss for the year excluding disposal group 328 243 –267

Profit attributable to:

Owners of the Parent 328 243 –265

SEKm 2013 2012 2011

Balance sheet

Non-current assets 1,783 1,825 2,280

Current assets 1,531 1,346 1,955

Total 3,314 3,171 4,235



Equity 1,909 1,833 2,147

Non-current liabilities 416 449 544

Current liabilities 989 889 1,544

Total equity and liabilities 3,314 3,171 4,235



2013 2012 2011

Average number of employees 2,900 2,923 3,105

of whom women, % 32 32 27


Average number of employees excluding disposal group 2,900 2,923 3,018

of whom women, % 32 32 27

SEKm 2013 2012 2011

Capital employed 1,770 1,863 2,396

of which disposal group – – 51

Net debt, incl. pension liability 158 316 510

of which disposal group – – 21

Personnel costsSEKm 2013 2012 2011

Boards, Presidents and Executive Vice Presidents 14 18 22

of which variable remuneration 0 0 1

Other employees 257 277 329

Salaries and remuneration 271 295 352

Pension costs1) 2 7 12

Other social security costs1) 111 133 119

Total 384 435 483


Total excluding disposal group 384 435 4661) Social security costs amount to SEK 113m (140; 131), of which pension costs are SEK 2m (7; 12).

Average number of employees by country2013 2012 2011

Of whom women,

%

Of whom women,

%

Of whom women,

%

Algeria 91 10 109 6 114 4

Argentina 137 42 122 42 123 46

Chile 3 67 113 13 224 11

Colombia 1,492 31 1,388 35 1,298 29

Ecuador 522 35 481 35 472 32

United Kingdom – – 80 13 169 13

Tunisia 407 10 366 14 358 13

Turkey – – – – 52 6

Other countries 248 58 264 59 295 52

Total 2,900 32 2,923 32 3,105 27

Disposal group – – – – –87 6

Total excluding disposal group 2,900 32 2,923 32 3,018 27

The Group’s holdings in major subsidiaries, joint ventures and associates are specified in Note 16.



16 List of major subsidiaries, joint ventures and associates

Group holdings of shares and participations in major companies at December 31, 2013.The selection of subsidiaries and joint ventures includes companies with sales in excess of SEK 500m in 2013.

Company nameCorporate registration number Domicile

Share of capital %

Subsidiaries

SCA Hygiene Products Nederland B.V. 135724 Zeist 100

SCA Tissue North America LLC 58-2494137 Delaware 100

SCA Skog AB 556048-2852 Sundsvall 100

SCA Hygiene Products (Fluff) Ltd. 577116 Dunstable 100

SCA Graphic Sundsvall AB 556093-6733 Sundsvall 100

SCA Hygiene Products Vertriebs GmbH HRB713332 Mannheim 100

SCA Tissue France SAS 702 055 187 Bois-Colombes 100

SCA Hygiene Products AB 556007-2356 Gothenburg 100

SCA Hygiene Products S.A., Spain B28451383 Madrid 100

SCA Hygiene Products S.A., France 509395109 Linselles, Bobigny 100

Copamex Comercial SA de CV SCM-931101-3S5 Mexico City 100

SCA Hygiene Products GmbH, Mannheim HRB3248 Mannheim 100

SCA Hygiene Products S.p.a 3318780966 Lucca 100

OOO SCA Hygiene Products Russia 4704031845 Moscow 100

SCA Timber AB 556047-8512 Sundsvall 100

SCA Hygiene Products GmbH, Wiesbaden HRB5301 Wiesbaden 100

SCA Hygiene Products GmbH, Vienna FN49537z Vienna 100

SCA Hygiene Sp.z.o.o. KRS No.0000427360 Warsaw 100

SCA Hygiene Products SA-NV, Belgium BE405.681.516 Stembert 100

SCA Packaging Obbola AB 556147-1003 Umeå 100

SCA Hygiene Products Inc 421987 Ontario 100

SCA Personal Care, Inc 23-3036384 Delaware 100

SCA Hygiene Products AfH Sales GmbH HRB 710 878 Mannheim 100

SCA Packaging Munksund AB 556237-4859 Piteå 100

SCA Hygiene Products Sp.z.o.o. KRS No.000008615 Olawa 100

Uni-Charm Mölnlycke B.V. 330631 Hoogezand 40

SCA Hygiene Products Slovakia s.r.o 36590941 Gemerskâ Hôrka 100

OY SCA Hygiene Products AB F101650275 Espoo 100

SCA Hygiene Spain S.COM.p.A D31235260 Allo 100

SCA Hygiene Malaysia Sdn Bhd 320704-U Kuala Lumpur 100

SCA Hygiene Products Tissue Ltd 8033620 Dunstable 100

SCA HP Supply SAS 509599619 Roissy, Bobigny 100

SCA Hygiene Products A/S, Norway 915620019 Brønnøysund 100

SCA Hygiene Products GmbH Neuss HRB 14343 Neuss 100

SCA Hygiene Products AG CH-020.3.917.992-8 Zug 99

SCA Hygiene Marketing (M) Sdn Bhd 313228-T Kuala Lumpur 100

Sodipan SNC 380251165 Saint Etienne de Rouvray 100

SCA Tissue Finland OY 0733538-0 Nokia 100

SCA Chile S.A. RUT: 97,282,000-3 Santiago de Chile 100

SCA Hygiene Products A/S, Denmark 20638613 Allerod 100

SCA Graphic Paper Netherlands 33137904 Amsterdam 100

SCA Timber Supply Ltd 2541468 Stoke on Trent 100

Everbeauty Corporation 22192869 Hong Kong 100

SCA Graphic Laakirchen AG, divested in 2013 FN171841h Laakirchen 100

SCA Hygiene Products Manchester Ltd 4119442 Dunstable 100

SCA Hygiene Products SA 283601000 N. Kifissia (Athens) 100

Gällö Timber AB, (50% – option 2016–2021) 556801-1786 Bräcke 100

SCA Hygiene Products Kft 01-09-716945 Budapest 100

Manufacturas Papeleras Canarias S.L B35089242 Telde (Gran Canaria) 100

SCA Timber BM Scandinavien AB 556302-0667 Sundsvall 100

Vinda Hong Kong 90235 Hong Kong 51



Company name Corporate registration number Domicile

Number of shares

Share of capital %

Carrying amount at year-end, SEKm

Joint ventures recognized in accordance with the proportional method

Productos Familia S.A., Colombia Sharecertif. 1260 Medellin 50

Familia del Equador 21761 Quito 50

ProNARO GmbH HRB 8744 Stockstadt 50

Joint ventures recognized in accordance with the equity method

PEPSCA Pty Limited 154461300 Victoria 105,000,000 50 734

SCA Yildiz Kagit ve Kisisel Bakim üretim A.S. 12559 Kocaeli 3,080,000 50 243

Komili Teknik Hizmetler ve Sanayi A.S. 166673 Istanbul 1 48 19

Associates

Bunzl & Biach Ges.m.b.H FN79555v Vienna 1 49 93

Associated company from acquisition of Vinda, see Note 3 59

Cartographica S.p.a. Guamo, Lucca, 33% Associated 1333330464 Lucca 16,667 33 26

IL Recycling AB 556056-2687 Solna 28,000 33 22

Other 62

Value at December 31 1,258

17 Non-current financial assets

SEKm 2013 2012 2011

Available-for-sale financial assets 1,657 1,448 1,034

Derivatives 836 1,192 986

Loan receivables, associates – – 2

Loan receivables, other 286 292 63



Value at December 31 excluding disposal group 2,779 2,932 2,081

Available-for-sale financial assets

Value at January 1 1,448 1,034 1,366

Investments 3 132 20

Company divestments –45 – –

Remeasurement for the year taken to equity, net 249 286 –351

Translation differences 2 –4 –1


In addition to shares in AB Industrivärden, pension assets attributable to some pension obligations are classified as available-for-sale financial assets. These obligations are not included in the normal pension calculations, as set out in Note 26 Provisions for pensions.

Available-for-sale financial assets, fair valueSEKm 2013 2012 2011

Shares – AB Industrivärden 1,591 1,341 931

Pension assets not included in IAS 19 calculation 58 99 95

Other 8 8 8

Total 1,657 1,448 1,034

The holding in AB Industrivärden amounted to 12,108,723 shares (12,093,643; 10,682,679). No impairment provisions were made for available-for-sale financial assets in 2013, 2012 or 2011.

If the stock market had risen/fallen by 15%, all other variables being unchanged, and the Group’s shareholdings changed in accordance with the stock market, equity would have increased/decreased by SEK 247m (216; 154). Sensitivity analysis calculations have been performed on the risk to which SCA was exposed at December 31, 2013 using assumptions on market movements that are regarded as reasonably possible in one year’s time.



18 Derivatives

BALANCE SHEETSCA uses financial derivatives to manage currency, interest rate and energy price risks. For a description of how SCA manages these risks, refer to pages 64–65 of the Board of Direc-tors’ Report. The table below shows the derivatives that impacted the Group’s balance sheet on December 31, 2013. For more information relating to derivatives in the balance sheet, see Note 31 Financial instruments by category.

Outstanding derivativesOf which Allocated

to disposal groupSEKm Total Currency1)

Interest rate Energy

2013

Nominal 47,347 26,738 18,061 2,548 –

Asset 1,077 288 758 31 –

Liability 647 178 307 162 –

2012

Nominal 41,652 24,789 14,300 2,563 –

Asset 1,400 332 1,024 44 –

Liability 484 178 188 118 –

2011

Nominal 42,571 29,626 10,669 2,284 –8

Asset 1,354 327 920 107 –

Liability 646 304 172 171 –11) Nominal SEK 79,821m (116,297; 112,609) is outstanding before the right of set-off.

INCOME STATEMENTDuring the year, transaction exposure hedges had an positive impact on operating profit for the year of SEK 45m (125; 260). At year-end, the net market value amounted to negative SEK 58m (pos: 46; pos: 18). Currency hedges increased the cost of non-current assets by SEK 26m (increased: 13; increased: 19). At year-end, the net market value amounted to negative SEK 6m (neg: 14; neg: 4).

In 2013, energy derivatives had a negative impact on operating profit for the year of SEK 91m (neg: 46; 0). Energy derivatives had an outstanding market value of negative SEK 131m (neg: 74; neg: 64) at year-end.

Derivatives positively impacted net interest items in the amount of SEK 188m (pos: 43; pos: 6). The net market value on outstanding interest rate derivatives amounted to SEK 451m (836; 749) at year-end. For further information relating to net financial items, see Note 8 Financial income and expenses.

Sensitivity analysisSensitivity analysis calculations have been performed on the financial instruments’ risk to which SCA was exposed at December 31, 2013 using assumptions on market movements that are regarded as reasonably possible in one year’s time.

If the Swedish krona had unilaterally weakened/strengthened by 5% against all curren-cies, outstanding financial hedges as well as trade payables and trade receivables would have increased/decreased profit for the year before tax by SEK 78m (51; 31).

If the Swedish krona had unilaterally weakened/strengthened by 5%, currency hedges relating to the cost of non-current assets would have increased/decreased equity by SEK 0m (4; 7).

If energy prices had increased/decreased by 20%, outstanding financial hedges rela-ting to natural gas and electricity, all other things being equal, would have decreased/increased energy costs for the year by SEK 251m (250; 236). In addition to the earnings impact, equity would have increased/decreased by SEK 104m (137; 129). The total energy cost for the Group, however, would have been affected differently if the price risk related to supply contracts was taken into account.

Hedge reserve in equityCurrency derivatives relating to hedging of transaction exposure mostly mature during the first half year of 2014. All derivatives in the hedge reserve at year-end 2013 will be realized before November 30, 2014. With unchanged exchange rates, profit after tax will be affec-ted negatively in the amount of SEK 26m (pos: 17; pos: 5). Currency derivatives relating to hedging of the cost of non-current assets have a maturity spread until December, 2014. With unchanged exchange rates, the cost of non-current assets will increase by SEK 5m (increase: 11; increase: 3) after tax.

Derivatives pertaining to hedging of interest expenses mature in December 2015 and August 2017. With unchanged interest rates, net financial items would be impacted negati-vely in the amount of SEK 25m (neg: 34; neg: 26) after tax.

The derivatives intended to hedge energy costs in the Group mature during 2014 and 2015. With unchanged prices, the Group’s profit after tax will be affected negatively in the amount of SEK 72m (neg: 60; neg: 46).

Hedging of net investmentsIn order to achieve the desired hedging level for foreign capital employed, SCA has hedged the net investments in a number of selected legal entities. In total, hedging positions affec-

ted equity in 2013 by negative SEK 423m (pos: 1,134; pos: 13). This result is largely due to hedges of net investments in EUR. The total market value of outstanding hedging transac-tions at year-end was negative SEK 352m (pos: 1,563; pos: 630). In total at year-end, SCA hedged net investments outside Sweden amounting to negative SEK 18,968m. SCA’s total foreign net investments at year-end amounted to SEK 53,494m.

Hedging of net investments in foreign operations, SEKmCurrency 2013 2012 2011

EUR 9,951 14,234 29,971

USD 6,123 2,917 2,673

GBP 2,284 1,236 1,466

PLN 442 – –

TWD 347 224 –

CLP 296 228 130

MXN –891 –771 –728

Other 416 544 1,716

Total 18,968 18,612 35,228

OUTSTANDING DERIVATIVES WITH HEDGE ACCOUNTINGThe table below presents outstanding derivatives with hedge accounting at December 31, 2013.

Derivatives with hedge accounting1)

Of which

Cash flow

Net investments in foreign entities 2)

Fair value of interest rate risk

in financing

Transaction exposure

SEKm Total Export and import flows Investments Interest Energy

2013

Asset 903 8 0 – 19 119 757

Liability 925 41 6 33 111 471 263

Hedge reserve after tax –128 –26 –5 –25 –72

2012

Asset 2,714 27 – – 26 1,637 1,024

Liability 375 5 14 44 110 74 128

Hedge reserve after tax –88 17 –11 –34 –60

2011

Asset 1,976 19 3 – 91 942 921

Liability 637 12 7 35 149 312 122

Hedge reserve after tax –70 5 –3 –26 –461) Outstanding derivatives with hedge accounting are included in the table Outstanding derivatives.2) Pertains to derivatives before right of set-off.



19 Inventories

SEKm 2013 2012 2011

Raw materials and consumables 2,854 2,913 3,297

Spare parts and supplies 1,852 1,769 1,840

Products in progress 1,216 1,010 1,034

Finished products 5,692 4,775 5,614

Felling rights 441 788 1,089

Advance payments to suppliers 16 9 14

Total 12,071 11,264 12,888

Allocated to disposal group – – –1,879


20 Trade receivables

SEKm 2013 2012 2011

Trade receivables, gross 14,091 14,302 16,461

Provision to reserves for doubtful receivables –218 –197 –445

Sub-total 13,873 14,105 16,016

Acquisition of Vinda, see Note 3 1,068 – –

Total 14,941 14,105 16,016



Analysis of credit risk exposure in trade receivablesSEKm 2013 2012 2011

Trade receivables neither overdue nor impaired 12,374 12,408 13,811

Trade receivables overdue but not impaired

< 30 days 1,146 1,281 1,712

30–90 days 207 248 304

> 90 days 146 168 189

Trade receivables overdue but not impaired 1,499 1,697 2,205

Total 13,873 14,105 16,016



In total, the Group has collateral mainly in the form of credit insurance taken out amounting to SEK 1,961m (1,186; 1,434). Of this amount, SEK 456m (192; 331) relates to the category Trade receivables overdue but not impaired.

Provision to reserves for doubtful receivablesSEKm 2013 2012 2011

Value at January 1 –197 –167 –453

Provision for possible loan losses –51 –21 –50

Confirmed losses 7 21 2

Increase due to acquisitions – –42 –

Decrease due to divestments 6 0 21

Decrease due to reversal of reserve for possible loan losses 16 5 27

Translation differences 1 7 8

Value at December 31 –218 –197 –445

Allocated to disposal group – – 278

Value at December 31 excluding disposal group –218 –197 –167

Total expense for the year for doubtful receivables amounted to SEK 35m (expense: 16; expense: 26).

21 Other current receivables

SEKm 2013 2012 2011

Receivables from associates 55 42 38

Accrued financial income 1 0 29

Derivatives 67 115 144

Prepaid expenses and accrued income 580 763 680

Other current receivables 1,750 1,733 2,092

Total 2,453 2,653 2,983



Other current receivablesSEKm 2013 2012 2011

VAT receivables 695 766 851

Suppliers with debit balance 138 112 254

Receivables for electricity and gas 88 183 169

Receivables from authorities 77 40 48

Other receivables 752 632 770

Total 1,750 1,733 2,092



22 Current financial assets, cash and cash equivalents

Current financial assetsSEKm 2013 2012 2011

Financial assets 38 6 5


Loan receivables, other 17 85 97

Total 227 168 295



Cash and cash equivalentsSEKm 2013 2012 2011

Cash and bank balances 2,328 1,718 1,121

Short-term investments < 3 months 1,321 299 1,631

Total 3,649 2,017 2,752



For a description of how SCA manages its credit and liquidity risks, refer to page 65 of the Board of Directors’ Report.

23 Non-current assets held for sale

SEKm 2013 2012 2011

Goodwill – – 1,385

Other intangible assets – 29 241


Land 13 231 216

Machinery and equipment 1 1,357 921

Construction in progress 1 76 382

Total 32 1,937 3,428


Total excluding disposal group 32 1,937 3,379

In 2013, SCA divested the Austrian publication paper mill in Laakirchen, which resulted in a decrease of SEK 1,042m in non-current assets held for sale.

The completion of the acquisition of Georgia-Pacific’s tissue operations in Europe led to a requirement to divest tissue operations in the UK and Scandinavia. These operations were valued at SEK 860m in 2012. In 2013, the divestment of Georgia-Pacific’s operations resulted in a decrease of SEK 833m in non-current assets held for sale.



24 Equity

SEKmShare

capitalOther capital

provided Reserves1)Retained earnings

Equity attribut-able to SCA’s shareholders

Non-controlling interests Total equity

2011

Value at January 1 2,350 6,830 –543 58,618 67,255 566 67,821

Profit for the year recognized in profit or loss – – – 548 548 59 607

Other comprehensive income for the period


Actuarial gains and losses relating to defined benefit pension plans2) – – – –3,517 –3,517 5 –3,512

Income tax attributable to components in other comprehensive income – – – 906 906 –1 905

– – – –2,611 –2,611 4 –2,607



Result from measurement at fair value recognized in equity – – –352 – –352 – –352

Transferred to profit or loss upon sale – – – – – – –

Cash flow hedges:

Result from remeasurement of derivatives recognized in equity – – –172 – –172 – –172

Transferred to profit or loss for the period – – –308 – –308 – –308

Transferred to cost of hedged investments – – 19 – 19 – 19

Translation differences in foreign operations – – –680 – –680 –4 –684

Result from hedging of net investments in foreign operations – – –252 – –252 – –252

Tax on items recognized directly in/transferred from equity3) – – 118 – 118 – 118

Other comprehensive income for the period, net after tax – – –1,627 –2,611 –4,238 0 –4,238

Total comprehensive income for the period – – –1,627 –2,063 –3,690 59 –3,631

Change in Group composition – – – – – 3 3

Remeasurement effect upon acquisition of non-controlling interests – – – –4 –4 – –4

Dividend, SEK 4.00 per share4) – – – –2,809 –2,809 –89 –2,898

Value at December 31 2,350 6,830 –2,170 53,742 60,752 539 61,291

2012

Profit for the year recognized in profit or loss – – – 4,957 4,957 43 5,000



Actuarial gains and losses relating to defined benefit pension plans2) – – – –2,011 –2,011 – –2,011

Income tax attributable to components in other comprehensive income – – – 479 479 – 479

– – – –1,532 –1,532 –1,532



Result from measurement at fair value recognized in equity – – 286 – 286 – 286

Transferred to profit or loss upon sale – – – – – – –

Cash flow hedges:


Transferred to profit or loss for the period – – –2 – –2 – –2


Translation differences in foreign operations – – –2,916 – –2,916 –68 –2,984

Result from hedging of net investments in foreign operations – – 1,134 – 1,134 – 1,134

Tax on items recognized directly in/transferred from equity3) – – 1 – 1 0 1

Other comprehensive income for the period, net after tax – – –1,517 –1,532 –3,049 –68 –3,117

Total comprehensive income for the period – – –1,517 3,425 1,908 –25 1,883

Change in Group composition – – – – – –7 –7

Remeasurement effect upon acquisition of non-controlling interests – – –4 – –4 – –4


Value at December 31 2,350 6,830 –3,691 54,217 59,706 458 60,1641) Revaluation reserve, Hedge reserve, Available-for-sale assets and Translation reserve are included in the Provisions line in the balance sheet, see specification on next page.2) Including payroll tax.3) For a specification of income tax attributable to components in other comprehensive income, refer to the next page.4) Dividend SEK 4.50 (4.20; 4.00) per share pertains to Parent Company shareholders. For the 2013 fiscal year, the Board has decided to propose a divided of SEK 4.75 per share to the Annual General Meeting.



SEKmShare

capitalOther capital

provided Reserves1)Retained earnings

Equity attribut-able to SCA’s shareholders

Non-controlling interests Total equity

2013

Profit for the year recognized in profit or loss – – – 5,547 5,547 17 5,564



Actuarial gains and losses relating to defined benefit pension plans2) – – – 1,927 1,927 47 1,974

Income tax attributable to components in other comprehensive income – – – –488 –488 –12 –500

– – – 1,439 1,439 35 1,474



Result from measurement at fair value recognized in equity – – 249 – 249 – 249

Transferred to profit or loss at sale

Cash flow hedges: – – – – – – –


Transferred to profit or loss for the period – – 49 – 49 – 49


Translation differences in foreign operations – – 763 – 763 82 845

Result from hedging of net investments in foreign operations – – –423 – –423 – –423

Tax on items recognized directly in/transferred from equity3) – – –131 – –131 – –131

Other comprehensive income for the period, net after tax – – 410 1,439 1,849 117 1,966

Total comprehensive income for the period – – 410 6,986 7,396 134 7,530

Acquisition of non-controlling interests – – – –666 –666 2,482 1,816

Remeasurement effect upon acquisition of non-controlling interests – – – –4 –4 – –4


Value at December 31 2,350 6,830 –3,281 57,372 63,271 3,033 66,3041) Revaluation reserve, Hedge reserve, Available-for-sale assets and Translation reserve are included in the Provisions line in the balance sheet, see specification below.2) Including payroll tax.3) For a specification of income tax attributable to components in other comprehensive income, see below.4) Dividend SEK 4.50 (4.20; 4.00) per share pertains to Parent Company shareholders. For the 2013 fiscal year, the Board has decided to propose a divided of SEK 4.75 per share to the Annual General Meeting.

For further information regarding equity, see Parent Company Note 46.

Equity, specification of reservesRevaluation reserve1) Hedge reserve2) Available-for-sale assets Translation reserve

SEKm 2013 2012 2011 2013 2012 2011 2013 2012 2011 2013 2012 2011

Value at January 1 107 107 107 –87 –68 275 270 –14 338 –3,981 –2,195 –1,263


Result from measurement at fair value recognized in equity – – – – – – 249 286 –352 – – –

Transferred to profit or loss upon sale – – – – – – – – – – – –

Cash flow hedges:

Result from remeasurement of derivatives recognized in equity – – – –123 –33 –172 – – – – – –

Transferred to profit or loss for the period – – – 49 –2 –308 – – – – – –

Transferred to cost of hedged investments – – – 26 13 19 – – – – – –

Translation differences in foreign operations3) – – – –2 0 0 – – – 765 –2,920 –680

Result from hedging of net investments in foreign operations4) – – – – – – – – – –423 1,134 –252

Tax on items recognized directly in/transferred from equity – – – 9 3 118 0 –2 – –140 – –

Other comprehensive income for the period, net after tax – – – –41 –19 –343 249 284 –352 202 –1,786 –932

Value at December 31 107 107 107 –128 –87 –68 519 270 –14 –3,779 –3,981 –2,1951) Revaluation reserve includes effect on equity of step acquisitions.2) See also Note 18 for details of when profit or loss is expected to be recognized.3) Of which transfer to profit or loss of realized exchange gains relating to divested companies is included in the amount of SEK 3m (loss: 20; loss: 228).4) Of which transfer to profit or loss of prior years’ result from hedging positions relating to divested companies is included in the amount of SEK –m (–; loss: 265).

Specification of income tax attributable to components in other comprehensive income2013 2012 2011

SEKmBefore

taxTax

effectAfter

taxBefore

taxTax

effectAfter

taxBefore

taxTax

effectAfter

tax

Actuarial gains and losses relating to defined benefit pension plans 1,974 –500 1,474 –2,011 479 –1,532 –3,512 905 –2,607

Available-for-sale financial assets 249 0 249 286 –2 284 –352 0 –352

Cash flow hedges –48 9 –39 –22 3 –19 –461 118 –343

Translation differences in foreign operations 845 – 845 –2,984 – –2,984 –684 – –684

Result from hedging of net investments in foreign operations –423 –140 –563 1,134 – 1,134 –252 – –252

Other comprehensive income 2,597 –631 1,966 –3,597 480 –3,117 –5,261 1,023 –4,238

At December 31, 2013, the debt/equity ratio amounted to 0.51, which is below SCA’s long-term target of 0.70. The debt/equity ratio deviates from this target at times and, over the past ten-year period, has varied between 0.44 and 0.70. The debt/equity ratio excluding pension liabilities was 0.48 at December 31, 2013. Change in liabilities and equity is described on page 29 under Financial position. SCA has a credit rating for long-term debt of Baa1 from Moody’s and A– from Standard & Poor’s (as of February 21, 2014). SCA’s financial risk manage-ment is described in the Risk and risk management section on pages 64–65. SCA’s dividend policy is described on page 16.



25 Financial liabilities

At December 31, 2013, interest-bearing gross debt amounted to SEK 38,272m (33,714; 37,128). The specification of financial liabilities is shown in the table below:

Financial liabilitiesCarrying amount

SEKm 2013 2012 2011

Current financial liabilities

Amortization within one year 211 462 442

Bond issues 1,021 – –


Loans with maturities of less than one year 7,642 9,372 8,607

Acquisition of Vinda, see Note 3 879 – –

Total1) 9,828 9,955 9,307



Non-current financial liabilities

Bond issues 15,921 12,897 13,206


Other long-term loans with maturities > 1 year < 5 years 8,435 8,086 10,930

Other long-term loans with maturities > 5 years 2,160 2,600 3,527

Acquisition of Vinda, see Note 3 1,632 – –

Total 28,444 23,759 27,821



Total 38,272 33,714 37,128



Fair value of financial liabilities 36,0512) 33,979 36,913


Fair value of financial liabilities excluding disposal group 36,0512) 33,979 36,7541) Fair value of short-term loans is estimated to be the same as the carrying amount.2) Excluding Vinda.

BorrowingFor issuing bonds in the European capital market, SCA has a Euro Medium Term Note (EMTN) program with a program amount of EUR 3,000m (SEK 26,801m). As of December 31, 2013, a nominal EUR 2,131m (1,652; 1,631) was outstanding with a remaining maturity of 4.0 years (3.2; 4.3). SCA also utilizes bond markets outside Europe and has issued a bond in the US for USD 425m (SEK 2,764m).

Bond issues

Issued MaturityCarrying amount,

SEKmFair value,

SEKm

Notes SEK 500m 2014 521 521

Notes SEK 500m 2014 500 500

Notes USD 425m 2015 2,966 2,929

Index Linked Interest Note SEK 300m 2015 321 315

Index Linked Interest Note SEK 500m 2015 536 526

Notes SEK 1,800m 2016 1,895 1,891

Floating Rate Note SEK 200m 2016 200 204

Notes EUR 600m 2016 5,709 5,729

Notes EUR 500m 2023 4,294 4,306

Total 16,942 16,921

SCA has a Swedish and a Belgian commercial paper program that can be utilized for current borrowing.

Commercial paper program1)

Program size Issued SEKm

Commercial paper SEK 15,000m 5,673

Commercial paper EUR 400m 222

Total 5,8951) Included in Loans with maturities of less than one year in the Financial liabilities table.

To limit the refinancing risk and maintain a liquidity reserve, SCA has syndicated bank facil-ities. In addition, SCA has contracted bilateral credit facilities with banks.

Credit facilities

Nominal MaturityTotal

SEKmUtilized

SEKmUnutilized

SEKm

Syndicated credit facilities EUR 1,000m 2016 8,934 – 8,934

EUR 1,000m 2018 8,934 – 8,934

Bilateral credit facilities SEK 318m 2014 318 – 318

Total 18,186 – 18,186

The table below shows the maturity profile of the gross debt excluding Vinda:

Maturity profile of gross debtSEKm Total 2014 2015 2016 2017 2018 2019+

Commercial paper 5,895 5,895 – – – – –

Bond issues 16,942 1,021 3,765 7,360 – – 4,796

Utilization of credit facilities – – – – – – –

Other loans 13,089 2,199 4,755 2,928 1,258 1,103 846

Total1) 35,926 9,115 8,520 10,288 1,258 1,103 5,6421) Gross debt includes accrued interest in the amount of SEK 165m.

After additions for net pension provisions and deductions for cash and cash equivalents, interest-bearing receivables and capital investment shares, the net debt was SEK 32,031m (32,927; 36,648).

For a description of the methods used by SCA to manage its refinancing risk, refer to page 65 of the Board of Directors’ Report.



26 Provisions for pensions

SCA has both defined contribution and defined benefit pension plans. The most substan-tial defined benefit plans are based on period of service and the remuneration received by employees on or close to retirement. The total pension costs for the defined benefit plans are shown below.

Costs for the year for defined benefit plansSEKm 2013 2012 2011

Current service cost, excluding contributions by plan participants 522 444 443

Past service cost 7 –16 –25

Tax expense for pensions 40 – –

Remeasurement, net 3 38 0

Net interest income/expense 122 –34 –60

Pension costs before effects of settlements 694 432 358

Settlements –10 –4 0

Net pension costs after effects of settlements 684 428 358


Net costs excluding disposal group 684 428 315

The increase in costs for 2013 is mainly attributable to the new accounting rules in IAS 19, which apply as of 2013.

Pension plans with balance sheet surpluses are recognized as an asset in the balance sheet, provided that they are not limited by the asset ceiling. Other pension plans, which in balance sheet terms are not fully funded or unfunded, are recognized as Provisions for pensions. The value of all pension plans is distributed among defined benefit obligations and plan assets, as shown below.

Provisions for pensions and similar obligationsSEKm 2013 2012 2011

Defined benefit obligations 21,929 24,024 21,976

Fair value of plan assets –20,741 –20,625 –18,087

Effect of asset ceiling 916 780 616

Provision for pensions, net 2,104 4,179 4,505

Allocated to disposal group, surplus in funded pension plans – – 184

Allocated to disposal group, provisions for pensions – – –1,390

Provision for pensions, net, excluding disposal group 2,104 4,179 3,299

Surpluses in funded plans recognized as interest-bearing assets amount to SEK 442m (682; 2) on the balance sheet date and provisions for pensions totaled SEK 2,546m (4,861; 3,301). Defined benefit obligations include obligations in an amount of SEK 1,899m (2,087; 1,975) pertaining to unfunded plans.

Defined benefit obligationsSEKm 2013 2012 2011

Value at January 1 24,024 20,737 19,953

Current service cost 527 448 489

Interest expense 786 706 1,009

Past service cost 7 15 –1

Tax expense for pensions 40 – –

Settlements and transfers 214 14 –29

Acquisitions and disposals –2,598 561 –25

Benefits paid –908 –728 –994

Pension taxes paid –26 – –

Remeasurement: financial assumptions –1,105 2,286 1,553

Remeasurement: demographic assumptions 388 108 –

Remeasurement: experience-based assumptions 280 174 –76

Pension taxes pertaining to remeasurement –193 – –

Translation effects 493 –297 97



Value at December 31, excluding disposal group 21,929 24,024 20,737

For 2013, settlements and transfers include SEK 186m attributable to the reclassification of payroll tax to pension liability.

Remeasurements in the defined benefit obligations comprise changes in financial assumptions, such as changes to the discount rate, etc. any changes in demographic assumptions and experience-based deviations. Experience-based deviations include unexpectedly high or low figures for employee turnover, early retirement or salary increases.

The changes to the Group’s plan assets are distributed as follows:

Plan assets

SEKm 2013 2012 2011

Fair value at January 1 –20,625 –18,087 –18,756

Interest income –688 –763 –1,113

Acquisitions and disposals 2,123 465 –

Contributions by plan participants –4 –4 –46

Contributions by the employer –576 –1,902 –1,057

Benefits paid, excl. settlements 908 728 994

Benefits paid for settlements 16 – –

Return in excess of recognized interest income –1,457 –1,476 1,970

Translation effects –438 414 –79

Fair value at December 31 –20,741 –20,625 –18,087

The plan assets are distributed according to the following classes of assets:

2013 2012 2011

Shares and mutual funds 62% 55% 55%

Interest-bearing securities 31% 38% 42%

Properties 3% 3% 3%

Other 4% 4% 0%

Total 100% 100% 100%

97% (97; 97) of the assets on the balance sheet date were traded on active markets in which market quotations are used for the valuation of assets.

As in the preceding year, no financial instruments issued by the company are included in the fair value of plan assets at December 31, 2013.

Effect of asset ceilingSEKm 2013 2012 2011


Interest expense 24 23 44

Other changes to asset ceiling 112 141 –295


Effect of asset ceiling pertains to funds in two Swedish foundations that can be used for possible future undertakings for early retirement for certain categories of employees.



The most significant individual pension plans are distributed as follows, SEKm:

Country Active Paid-up pension

policies Pensioners Total obligationPlan assets,

fair valueEffect of

asset ceiling NetDuration of

obligation, years

Netherlands 1,344 741 733 2,818 –2,607 – 211 21

United Kingdom 1,190 4,228 5,489 10,907 –11,294 – –387 18

Sweden 1,227 537 866 2,630 –2,666 – –36 20

Germany 755 219 957 1,931 –1,829 – 102 15

US 460 53 184 697 –618 – 79 13

Other 1,665 313 968 2,946 –1,727 916 2,135 13

Total 6,641 6,091 9,197 21,929 –20,741 916 2,104

The budgeted contributions for the company’s defined benefit pension plans for 2014 were calculated at SEK 563m.

Principal actuarial assumptions

Sweden United Kingdom Eurozone US

2013

Discount rate 3.94 4.54 3.10 4.92

Expected salary increase rate 3.25 4.00 3.25 N/A

Expected inflation 2.00 3.00 2.00 2.00

Life expectancy, men1) 23 22 22 19

Life expectancy, women1) 24 24 24 21

2012

Discount rate 3.07 4.10 2.75 4.09




Life expectancy, women1) 24 24 24 21

2011

Discount rate 3.66 4.87 4.80 4.75




Life expectancy, women1) 24 24 24 211) Life expectancy, expressed in years, for an individual currently aged 65.

The actuarial assumptions comprise the most significant assumptions applied when cal-culating defined benefit obligations at the balance sheet date.

The company determines the discount rate based on AA-rated corporate bonds that match the duration of the obligations. If no such corporate bonds are available, govern-ment bonds or mortgage bonds are used.

Inflation assumptions are based on a combination of central bank targets, implicit mar-ket expectations and long-term analyst forecasts. Assumptions regarding salary increases are based on market expectations and market research forecasts.

Remeasurement effects arise: as a result of deviations from actuarial and experience-based assumptions; when the return is different than expected; and as a result of changes to the asset ceiling. These gains and losses are recognized directly in equity in the period in which they arise. The table below shows the sensitivity of the defined benefit obligations with respect to the principal actuarial assumptions.

The sensitivity of the defined benefit obligations with respect to the principal actuarial assumptions is as follows:

Change of obligation, increased obligation (–), SEKm

Discount rate +0.25% 883

Price inflation, incl. salary inflation +0.25% –766

Life expectancy +1 year –613

The above sensitivity analysis is calculated by changing one assumption while the others remain constant.

NetherlandsThe plan, which is managed by an independent fund, is a defined benefit plan with premi-ums paid by the company. Surpluses in the fund remain in the fund assets but can be uti-lized in the form of premium discounts.

The plan is based on average salary and includes beneficiaries’ pension and disability pension. The plan is obligated to meet the minimum legislated funding level. The plan applies a duration matching strategy to control the interest rate risk in the plan.

United KingdomThe plan, which is managed by an independent fund under British law, is a defined benefit plan with premiums paid to the company and the employee.

Surpluses in the pension fund remain in the fund assets but can be utilized in the form of premium discounts. The plan is based on final salary and includes beneficiaries’ pension and disability pension. The plan was closed to new participants in July 2007. The plan is obligated to meet the minimum funding level according to an agreement with the pension fund.

SwedenThe ITP2 plan (supplementary pensions for salaried employees) encompasses employees born before 1979 and is a defined benefit plan that provides retirement pension based on final salary. The ITP plan provides pension as a percentage of various salary intervals. If the total period of service is less than 30 years, the pension is reduced proportionately. The ITP2 plan is managed by a fund, and the company may compensate itself using any sur-pluses in the fund assets.

GermanyThe plan is a defined benefit plan and, in addition to retirement pension, includes benefi-ciaries’ pension and disability pension. The plan, which is managed by a fund, provides pension as a percentage of a salary interval and is based on final salary. The plan also includes individual pensions based on average salary. No premium payments are required by the company or its employees. The company may compensate itself using any sur-pluses in the fund assets.

USIn addition to retirement pension, the plan includes accident insurance and life insurance. The plan is a defined benefit plan with premiums paid by the company. Benefits are based on a standard amount per service year and are financed through a pension fund.

The plan is obligated to meet the minimum legislated funding level. Surpluses in the pension fund can be utilized in the form of premium discounts.

OtherSCA has a number of minor pension obligations in some 15 countries, the largest of which are in France, the Netherlands, Norway, Sweden and Austria. Some of these plans are funded.

Multiemployer plansSCA has obligations for disability and family pensions for salaried employees in Sweden, secured through insurance with the insurance company Alecta. The company also has employees in Finland who are covered by the country’s statutory TyEL pension plan. These assumptions are secured through the insurance company Varma. These benefits are reported as defined contribution plans, since there is no basis for allocating the obliga-tions, plan assets and costs to the individual companies covered by the plan. The contri-butions for these plans are expected to amount to SEK 47m for 2014.

Note 26 – Provisions for pensions, cont.



27 Other provisions

SEKmEfficiency programs

Current operations Tax risks Environment Legal disputes Other Total

Value at January 1 717 25 488 92 119 310 1,751

Provisions during the year 939 67 12 113 34 64 1,229

Utilization during the year –811 –24 – –64 –32 –13 –944

Reclassifications –20 –22 – – – 143 101

Dissolved during the year – – –204 – –8 –377 –589

Translation differences 21 – –1 1 4 –1 24

Value at December 31 846 46 295 142 117 126 1,572

Provisions comprise:

Short-term component 1,158

Long-term component 414

Other provisions amount to SEK 1,572m (1,751; 1,600). During the year, new provisions were made totaling SEK 1,229m, of which SEK 939m relates to provisions for restructuring programs. Of provisions for the year for “Environment,” SEK 54m pertains to a liability for carbon dioxide emissions, which will be paid out in 2014. Of the “Efficiency programs” pro-

visions, SEK 811m was paid out in 2013, SEK 719m is anticipated to be paid out in 2014, SEK 78m in 2015, SEK 25m in 2016 and the remaining SEK 24m in 2017. Provisions for effi-ciency programs were changed in 2013 due to reclassifications of SEK 20m to other oper-ating liabilities.

28 Other non-current liabilities

SEKm 2013 2012 2011


Other non-current liabilities 136 171 180

Total 172 199 219



Of other non-current liabilities, SEK 15m (13; 27) falls due for payment later than within five years.

29 Other current liabilities

Other current liabilitiesSEKm 2013 2012 2011

Liabilities to associates 4 6 4


Accrued expenses and prepaid income 6,874 6,873 7,449

Other operating liabilities 2,070 1,994 1,731

Acquisition of Vinda, see Note 3 537 – –

Total 9,725 9,032 9,375



Accrued expenses and prepaid incomeSEKm 2013 2012 2011

Accrued social security costs 318 322 431

Accrued vacation pay liability 486 514 885

Other liabilities to personnel 912 971 1,101

Accrued financial expenses 166 151 176

Bonus and discounts to customers 3,057 2,793 2,415

Other items 1,935 2,122 2,441

Total 6,874 6,873 7,449



30 Liquidity risk

The table below shows the Group’s liquidity risk regarding financial liabilities (including interest payments), net settled derivatives that constitute financial liabilities and negative cash flows from gross settled derivatives. For a description of how SCA manages its liquid-ity risk, refer to page 65 of the Board of Directors’ Report.

Liquidity risk

SEKmLess than

1 yearBetween

1 and 5 yearsMore than

5 years

December 31, 2013

Loans including interest 9,883 22,273 5,928

Net settled derivatives –60 55 –232

Energy derivatives 126 36 –

Trade payables 11,619 885 –

Total 21,568 23,249 5,696

Allocated to disposal group – – –


Gross settled derivatives1) 24,724 2,321 –

December 31, 2012


Net settled derivatives –4 203 –


Trade payables 11,258 1,067 –

Total 22,117 24,420 2,075

Allocated to disposal group – – –


Gross settled derivatives1) 24,309 2,334 –

December 31, 2011


Net settled derivatives –5 175 0


Trade payables 12,456 1,270 –

Total 22,758 28,834 3,054

Allocated to disposal group –2,856 –5 –


Gross settled derivatives 1) 27,497 2,372 –1) The gross settled derivatives have, largely, corresponding positive cash flows and therefore in SCA’s

opinion do not constitute any real liquidity risk.



31 Financial instruments by category

The following categorization has been conducted for financial instruments:

Of which

SEKm

Carrying amount in the balance sheet

Loans and receivables

Financial liabilities measured at

amortized cost

Measured at fair value through

profit or loss

Derivatives used for hedge

accounting

Available-for-sale financial

assets

Held-to- maturity

investments

Allocated to disposal

group

December 31, 2013

Non-current financial assets 2,779 59 98 738 1,657 227 –

Other non-current assets 2 – 1 1 – – –

Trade receivables 14,941 14,941 – – – – –

Other current receivables 67 – 41 26 – – –

Current financial assets 227 55 128 44 – – –

Cash and cash equivalents 3,649 3,649 – – – – –

Total assets 21,665 18,704 268 809 1,657 227 –

Non-current financial liabilities 26,812 10,720 15,796 296 –

Other non-current liabilities 36 – 10 26 –

Current financial liabilities 8,949 8,353 590 6 –

Trade payables 12,504 12,504 – – –

Other current liabilities 240 – 107 133 –

Financial liabilities, Vinda 2,511

Total liabilities 51,052 31,577 16,503 461 –

December 31, 2012

Non-current financial assets 2,932 66 298 894 1,448 226 –

Other non-current assets 16 – – 16 – – –

Trade receivables 14,105 14,105 – – – – –

Other current receivables 115 – 60 55 – – –

Current financial assets 168 91 39 38 – – –

Cash and cash equivalents 2,017 2,017 – – – – –

Total assets 19,353 16,279 397 1,003 1,448 226 –

Non-current financial liabilities 23,759 10,640 12,943 176 –

Other non-current liabilities 28 – – 28 –

Current financial liabilities 9,955 9,834 105 16 –

Trade payables 12,325 12,325 – – –

Other current liabilities 159 – 51 108 –

Total liabilities 46,226 32,799 13,099 328 –

December 31, 2011

Non-current financial assets 2,081 65 176 810 1,034 –4

Other non-current assets 31 – – 31 – –

Trade receivables 11,548 16,016 – – – –4,468

Other current receivables 144 – 46 98 – –

Current financial assets 292 102 165 28 – –3

Cash and cash equivalents 2,644 2,752 – – – –108

Total assets 16,740 18,935 387 967 1,034 –4,583

Non-current financial liabilities 27,711 14,772 12,891 158 –110

Other non-current liabilities 39 – – 39 –

Current financial liabilities 9,266 8,963 316 27 –40

Trade payables 10,866 13,726 – – –2,860

Other current liabilities 190 – 41 150 –1

Total liabilities 48,072 37,461 13,248 374 –3,011

Distribution by level when measured at fair value

Carrying amount December 31 Of which fair value by Level

SEKmMeasured at fair value through profit or loss

Derivatives used for hedge accounting

Available-for-sale financial assets 1 2 3

December 31, 2013

Derivatives 268 809 – 1,077 –

Non-current financial assets – 1,657 1,649 8 –

Total assets 268 809 1,657 1,649 1,085 –

Derivatives 186 461 – 647 –

Current financial liabilities 521 – 521 –

Non-current financial liabilities 15,796 – 15,796 –

Total liabilities 16,503 461 – 16,964 –



32 Offsetting of financial assets and liabilities

SEKm Assets Liabilities

December 31, 2013

Derivatives

Gross amount 1,636 1,206

Offsettable amount –559 –559

Net amount recognized in the balance sheet 1,077 647

ISDA agreements whose transactions are not offset in the balance sheet –451 –451

Net after offsetting in accordance with ISDA agreements 626 196

December 31, 2012

Derivatives


Offsettable amount –1,658 –1,658




December 31, 2011

Derivatives


Offsettable amount –1,199 – 1,199




Other financial assets and liabilities have not been offset in the balance sheet and are not subject to framework agreements pertaining to offsetting.

33 Contingent liabilities

SEKm 2013 2012 2011

Guarantees for

employees – – 9

associates 19 20 23

customers and others 48 46 45

Tax disputes 374 349 507

Other contingent liabilities 250 179 114

Total 691 594 698



Contingent liabilities for tax disputes mainly relate to claims for additional taxes in Spain. The claim by the Spanish tax authorities amounts to EUR 29.6m, including interest. The claim is related to restructuring measures that the sellers of a Spanish company carried out prior to SCA’s acquisition of the company in 1997. SCA has provided a security for pay-ment of the tax, but is challenging the claim and assesses that the claim will not be upheld in court. Consequently, no provision has been made in the accounts for this claim.

SCA entered into lease-out/lease-in transactions during 1996 with US banks as coun-terparties pertaining to the two LWC plants in Ortviken, Sweden. The terms of the con-tracts were originally 32 and 36 years. However, SCA has the opportunity to cancel the transactions in 2014 and 2015, respectively, without incurring any financial consequences. At the time the transactions were entered into, the net present value of the leasing amount which SCA has undertaken to pay totaled about SEK 4bn or USD 611m. This amount, in accordance with the agreements, is partly deposited in accounts in banks with at least A– rating, and partly in US securities with an AA+ rating. The value of outstanding deposits and US securities amounted to SEK 3.96bn at December 31, 2013. SCA bears the credit risk against the depositary banks. Should the rating of a depositary bank decline in the future, SCA has the possibility to transfer the deposit to another bank with a better rating. Moreover, SCA is liable to take such action if the depositary bank’s rating falls below A–. In January 2014, SCA exercised its right to premature termination in one of the two transac-tions. Payments totaling SEK 0.76bn have been made and the value of outstanding depos-its and securities has thus declined by a corresponding amount.

The counterparties have accepted that the deposited funds are applied for the leasing undertakings. The advance payments and deposits were netted during 1996 in the bal-ance sheet. Should SCA, as the result of extraordinary events (of a force majeure nature), elect not to fulfill, or cannot fulfill the leasing contracts, SCA is liable to compensate the counterparties for financial losses, which may be incurred as a result. Compensation var-ies during the duration and can amount to a maximum of about 4% of the present value of the leasing amount. The agreements were composed and examined by legal experts in Sweden and the US and are considered to follow the standard practice for lease-out/lease-in transactions.

During 2000, SCA also entered into a leasing transaction with US banks as counterpar-ties pertaining to the Östrand pulp mill in Timrå, Sweden. The term of the transaction was originally 30 years. However, SCA has the opportunity to cancel the transactions in 2017 without incurring any financial consequences. At the time the transactions were entered into, the current value of the leasing amount that SCA has undertaken to pay amounted to about SEK 4bn or USD 442m. Of this amount, in accordance with the agreement, an amount corresponding to SEK 3.6bn was partly invested in accounts in banks, partly in US securities, which at the time of the agreement had an AA and AAA rating, respectively. In 2009, the leasing transaction with one of the US banks was terminated prematurely. The value of outstanding deposits and US securities subsequently amounted to SEK 1.72bn at December 31, 2013. SCA carries the credit risk against the depositary banks. Should the rating of a depositary bank decline in the future, SCA has the possibility to transfer the deposit to another bank with a better rating. SCA also has an obligation to exchange the US securities if their rating falls below AA– or A, respectively. The rating of the original securities declined in 2008, which resulted in SCA exchanging these securities for bank-guaranteed securities and US government bonds. The counterparties have accepted that the deposited funds are applied for the leasing undertakings. The advance payments and deposits were netted during 2000 in the balance sheet. Should SCA, as the result of extraordinary events (of a force majeure nature), elect not to fulfill, or cannot fulfill the leas-ing contracts, SCA is liable to compensate the counterparties for financial losses, which

Distribution by level when measured at fair value

Carrying amount December 31 Of which fair value by Level

SEKmMeasured at fair value through profit or loss

Derivatives used for hedge accounting

Available-for-sale financial assets 1 2 3

December 31, 2012

Derivatives 397 1,003 – – 1,400 –

Non-current financial assets – – 1,448 1,440 8 –

Total assets 397 1,003 1,448 1,440 1,408 –


Current financial liabilities –

Non-current financial liabilities 12,943 12,943


December 31, 2011

Derivatives 387 967 – – 1,354 –

Non-current financial assets – – 1,034 1,026 8 –

Total assets 387 967 1,034 1,026 1,362


Current financial liabilities 85 – 85 –

Non-current financial liabilities 12,891 – 12,891 –


The table above specifies how financial instruments, excluding financial liabilities, were measured at fair value in accordance with the fair value hierarchy with the following three levels: Level 1: Quoted prices on an active market for identical assets or liabilities, such as shares or bonds quoted on the stock exchange.Level 2: Other observable inputs for the asset or liability than quoted prices included in Level 1, either directly (price quotations) or indirectly (obtained from price quotations), such as forward contracts or interest rate swaps.Level 3: Inputs for the asset or liability not based on observable market data, but containing the assumptions and estimates of management, for example, unquoted shares.



35 Operating loss

Operating loss by type of costSEKm 2013 2012

Other operating income 457 98

Other external costs –443 –156

Personnel and Board costs –389 –331

Depreciation/amortization –62 –58

Other operating expenses excluding depreciation/amortization –156 –43

Total –593 –490

The item “Other external costs” includes consultancy fees, travel expenses, leasing expenses, management costs, and so forth.

AUDITING EXPENSESRemuneration to auditors can be specified as follows:

SEKm 2013 2012

PwC

Audit assignments –9 –9

Auditing activities other than the audit assignment –1 –1

Tax consultancy services –1 –7

Other assignments –11 –12

Total –22 –29

LEASINGFuture payment commitments for non-cancellable operating leases are as follows:

SEKm 2013 2012

Within 1 year 44 45

Between 2 and 5 years 126 147

Later than 5 years 26 47

Total 196 239

Cost for the year for leasing of assets amounted to SEK 45m (46). Leased assets comprise means of transportation, office premises and technical equipment. In reality, such con-tracts can be terminated early.

36 Personnel and Board costs

Salaries and remunerationSEKm 2013 2012

Board of Directors1), President, Executive Vice Presidents and Central Staff Managers (5 (5)) 72 70

of which variable remuneration 30 30

Other employees 116 99

Total 188 1691) Board fees decided by the Annual General Meeting amounted to SEK 6.3m (6.0). For further information,

see Note 6.

Social security costsSEKm 2013 2012

Total social security costs 194 143

of which, pension costs 2) 136 892) Of the Parent Company’s pension costs, SEK 56m (38) pertain to the Board, President, Executive Vice

Presidents and Central Staff Managers. Former Presidents and Executive Vice Presidents and their survi-vors are also included. The company’s outstanding pension obligations to these individuals amount to SEK 326m (291).

Pension costsSEKm 2013 2012

Self-administered pension plans

Costs excl. interest expense 81 36

Interest expense (recognized in personnel costs) 14 17

95 53

Retirement through insurance

Insurance premiums 17 20

Other –1 –1

111 72

Policyholder tax 0 0

Special payroll tax on pension costs 24 15

Cost of credit insurance, etc. 1 2

Pension costs for the year 136 89

Premiums during the year for disability and family pension insurance with Alecta amounted to SEK 2m (3). Premiums for 2014 are expected to amount to SEK 3m (see also Note 26 Pension provisions, page 101). Personnel costs also include other personnel costs in the amount of SEK 10m (15).

Average number of employees2013 2012

Sweden 108 108

of whom women, % 51 50

may be incurred as a result. Compensation varies during the duration and can amount to a maximum of about 9% of the present value of the leasing amount, which subsequent to the above-mentioned premature termination, amounts to USD 227m. The agreements, as in the 1996 transactions, were composed and examined by legal experts in Sweden and the US and are considered to follow the standard practice for this type of transaction.

In 2007, SCA entered into a sale and leaseback transaction with a European bank relat-ing to the new soda recovery boiler at the kraftliner plant in Obbola, Sweden. The original term of the contract is 25 years and SCA has a right to terminate the transaction in 2023 without any financial consequences. The present value of SCA’s future rental amounts was SEK 671m, which was invested in a security with an A rating issued by the counterparty and deposited in a Swedish bank assigned to handle rental payments during the term of the contract. Should the counterparty’s rating fall below BBB–, SCA is entitled, without incurring any financial consequences, to terminate the transaction in advance. Should SCA, as the result of extraordinary events (of a force majeure nature), elect not to fulfill, or cannot fulfill the leasing contract, SCA is liable to compensate the counterparty for any economic loss that may be incurred as a result. Compensation varies during the term and can amount to a maximum of 12% of the transaction amount. SCA has the use of the facil-ity without operational restrictions. The lease and depositary arrangement were recog-nized net in SCA’s balance sheet in 2007.

SCA signed a ten-year fixed-price agreement with a Norwegian electricity supplier comprising electricity deliveries corresponding to approximately 17% of the estimated consumption. The agreement became effective in 2009.

34 Pledged assets

Pledged assets related to

financial liabilities Other

Total

SEKm 2013 2012 2011

Real estate mortgages 7 – 7 7 7

Chattel mortgages 15 20 35 35 36

Other 227 137 364 366 140

Total 249 157 406 408 183

Allocated to disposal group – – – – –1

Total excluding disposal group 249 157 406 408 182

Liabilities for which some of these assets were pledged as collateral amounted to SEK 5m (5; 0).

Notes – Parent Company

Note 33 – Contingent liabilities, cont.


Financial statements | Notes – Parent Company

Breakdown of employees by age groups, %2013 21–30 yrs 31–40 yrs 41–50 yrs 51–60 yrs 61– yrs

8 25 43 17 7

Of the total number of Board members and senior executives, 17% (17) and 24% (24), respectively, are women.

37 Depreciation/amortization of tangible and intangible fixed assets

SEKm 2013 2012

Buildings 4 5

Land improvements 55 50

Machinery and equipment 3 3

Sub-total 62 58

Capitalized development costs 0 0

Total 62 58

38 Financial items

SEKm 2013 2012

Result from participations in Group companies

Dividends from subsidiaries 7,268 3,643

Group contributions received from subsidiaries 1,964 4,093

Group contributions paid to subsidiaries –699 –219

Result from participations in other companies

Dividend from other companies 9 2

Capital gains 7 41

Interest income and similar profit items

Interest income, external 68 389

Interest income, subsidiaries 960 550

Interest expenses and similar loss items

Interest expenses, external –1,230 –524

Interest expenses, subsidiaries –1,884 –3,194

Total 6,463 4,781

39 Appropriations and untaxed reserves

Of the Parent Company’s untaxed reserves, SEK 197m (181) pertains to accumulated depreciation in excess of plan.

40 Income taxes

Tax on profit for the yearSEKm 2013 2012

Deferred tax income (–) expense (+) 30 226

Total 30 226

2013 2012

Reconciliation SEKm % SEKm %

Tax income/expense 30 0.5 226 5.3

Expected tax 1,288 22.0 1,125 26.3

Difference –1,258 –21.5 –899 –21.0

Difference is due to:

Taxes related to prior periods 80 1.4 0 0.0

Non-taxable dividends from subsidiaries –1,599 –27.3 –958 –22.4

Non-taxable Group contributions from subsidiaries –143 –2.5 –162 –3.8

Non-deductible Group contributions to subsidiaries 395 6.7 412 9.6

Changed tax rate – – –127 –2.9

Other non-taxable/non-deductible items 9 0.2 –64 –1.5

Total –1,258 –21.5 –899 –21.0

The Parent Company participates in the Group’s tax pooling arrangement and pays the majority of the Group’s total Swedish taxes. These are now recognized in profit and loss as Group contributions paid and received.

CURRENT TAX LIABILITY (+), TAX ASSETS (–)The change to the current tax asset during the period is explained below:

SEKm 2013 2012

Value at January 1 –18 –18

Current tax income – –

Income taxes paid 0 0

Tax expense for other Group companies – –

Value at December 31 –18 –18

DEFERRED TAX EXPENSE (+), TAX INCOME (–)

SEKm 2013 2012

Changes in temporary differences –50 226

Adjustments for prior periods 80 0

Total 30 226

PROVISIONS FOR TAXESThe change to the provisions for taxes is explained below:

SEKmValue at

January 1 Deferred tax

expense Value at

December 31

Land and buildings 1,175 267 1,442

Provisions for pensions –107 –13 –120

Tax loss carryforwards –380 –224 –604

Other –39 0 –39

Total 649 30 679

41 Intangible fixed assets

Capitalized development costsSEKm 2013 2012

Accumulated costs 20 20

Accumulated amortization –19 –19

Residual value according to plan 1 1

Value at January 1 1 1

Investments 0 0

Amortization for the year 0 0

Value at December 31 1 1

42 Tangible fixed assets

Buildings LandMachinery and

equipment

SEKm 2013 2012 2013 2012 2013 2012

Accumulated cost 148 148 3,357 2,330 23 22

Accumulated depreciation –95 –91 –796 –742 –12 –9

Accumulated write-ups – – 5,019 5,066 – –

Planned residual value 53 57 7,580 6,654 11 13

Value at January 1 57 64 6,654 6,426 13 14

Investments 1 0 1,056 299 1 2

Sales and disposals 0 –2 –76 –21 0 0

Depreciation for the year –5 –5 –54 –50 –3 –3

Value at December 31 53 57 7,580 6,654 11 13

Land includes forest land in the amount of SEK 6,915m (6,013).


Notes – Parent Company | Financial statements

43 Participations

Subsidiaries Associates Other companies

SEKm 2013 2012 2013 2012 2013 2012

Accumulated costs 129,161 124,066 – – 13 157

Accumulated write-ups 140 140 – – – 30

Accumulated write-downs –140 –140 – – – –

Planned residual value 129,161 124,066 0 0 13 187

Value at January 1 124,066 124,364 – 88 187 32

Investments 5,377 – – 2 130

Increase through acquisition of subsidiaries – 344 – – – –

Reclassifications – 218 – –88 – –

Repayment of equity –64 –860 – – – –

Divestments –218 – – – –152 –5

Revaluations for the year – – – – –24 30

Value at December 31 129,161 124,066 0 0 13 187

The events in 2013 pertain to investments of new shares in the Belgium company SCA Capital NV, part repayment of equity in the Italian subsidiary SCA Hygiene Products S.p.A, and the sales of a number of minor blocks of shares. In addition, the company received shares in AB Industrivärden as compensation from the pension fund for pension pay-ments. The company than sold all shares in AB Industrivärden.

Parent Company’s holdings of shares and participations in subsidiaries, December 31, 2013

Company name Corp. Reg. No. DomicileNo. of

shares

Share of equity,

%

Carrying amount,

SEKm

Swedish subsidiaries:

Fastighets- och Bostads-aktiebolaget FOBOF 556047-8520 Stockholm 1,000 100 0

SCA Försäkrings-aktiebolag 516401-8540 Stockholm 140,000 100 14

SCA Kraftfastigheter AB 556449-7237 Stockholm 1,000 100 0

SCA Research AB 556146-6300 Stockholm 1,000 100 0

SCA Hedging AB 556666-8553 Stockholm 1,000 100 0

Foreign subsidiaries:

SCA Group Holding BV 33181970 Amsterdam 246,347 100 94,350

SCA Capital NV 0810.983.346 Diegem 1,199,999 100 34,518

SCA UK Holdings Ltd 03665635 Dunstable 1 0 0

SCA Hygiene Products S.p.A. 03318780966 Capannori 125,000 25 279

Total carrying amount of subsidiaries 129,161

44 Receivables from and liabilities to subsidiaries

SEKm 2013 2012

Fixed assets

Interest-bearing receivables 354 427

Total 354 427

Current assets

Interest-bearing receivables – 3

Other receivables 1,740 3,294

Total 1,740 3,297


Interest-bearing liabilities 2,180 2,100

Total 2,180 2,100

Current liabilities


Other liabilities 1,271 807

Total 62,293 67,303

45 Other current receivables

SEKm 2013 2012

Prepaid expenses and accrued income 24 67

Other receivables 113 98

Total 137 165

Prepaid expenses and accrued incomeSEKm 2013 2012

Prepaid lease of premises 6 6

Prepaid financial expenses 0 46

Prepaid pension premiums 4 1

Other items 14 14

Total 24 67

46 Equity

The change in equity is shown in the financial report relating to Equity presented on page 73. The share capital and number of shares have increased since 1993 with new issues, conversions and splits as set out below:

Year Event No. of sharesIncrease in

share capital

Cash payment,

SEKm

1993 Number of shares, January 1, 1993 172,303,839

1993 Conversion of debentures and new subscription through warrants 1

4,030,286 40.3 119.1

New issue 1:10, issue price SEK 80 17,633,412 176.3 1,410.7

1994 Conversion of debentures 16,285 0.2 –

1995 Conversion of debentures 3,416,113 34.2 –

1999 New issue 1:6, issue price SEK 140 32,899,989 329.0 4,579.0

2000 Conversion of debentures 101,631 1.0 15.0

2001 New issue, private placement 1,800,000 18.0 18.0

2002 New subscription through warrants IIB 513 0 0.1

2003 Conversion of debentures 1,127,792 11.3 288.4

New subscription through warrants IIB 1,697,683 17.0 434.5

2004 Conversion of debentures 9,155 0.1 1.1

2007 Split 3:1 470,073,396 – –

2013 Number of shares, December 31, 2013 705,110,094

SCA’s share capital, December 31, 2013Number of

votesNumber of

sharesShare capital,

SEKm

A shares 10 87,417,535 291

B shares 1 617,692,559 2,059

Total 705,110,094 2,350

The quotient value of the Parent Company’s shares amounts to SEK 3.33.Treasury shares at the beginning and at the end of the year amounted to 2,767,605

shares. Shares were held as part of the employee stock option programs that expired in 2008 and 2009.

47 Provisions for pensions

The Parent Company has both defined contribution and defined benefit pension plans. Below is a description of the Parent Company’s defined benefit plans.

PRI PENSIONSPension liabilities pertaining to PRI pensions have been secured through a common Swedish SCA pension fund. The market value of the Parent Company’s portion of the foundation’s assets at December 31, 2013 amounted to SEK 88m (73). In the past two years, no compensation has been received. The capital value of the pension obligations at December 31, 2013 amounted to SEK 107m (102). Pension payments of SEK 6m (5) were made in 2013. Since the value of the assets in 2013 is below that of the pension obligations in the amount of SEK 19m (29), this is recognized as a provision in the balance sheet. The provision is included below.


Financial statements | Notes – Parent Company

OTHER PENSION OBLIGATIONSNote 6 Personnel and Board costs in the Group’s notes describes the other defined benefit pension plans of the Parent Company. The table below shows the change between the years.

Capital value of pension obligations relating to self-administered pension plansSEKm 2013 2012

Value at January 1 536 491

Compensation received from assumed pension obligations – 27

Reclassification 5 –

Costs excluding interest expense 81 36

Interest expense (recognized in personnel costs) 14 17

Payment of pensions –38 –35

Value at December 31 598 536

External actuaries have carried out capital value calculations pursuant to the provisions of the Swedish Act on Safeguarding of Pension Obligations. The discount rate is 2.6% (3.5). The defined benefit obligations are calculated based on salary levels valid on the respec-tive balance sheet dates.

Next year’s expected disbursements regarding defined benefit pension plans amount to SEK 37m.

48 Non-current interest-bearing liabilities

Carrying amount Fair value

SEKm 2013 2012 2013 2012

Bond issues 11,766 7,160 12,086 7,723

Other non-current loans with a term > 1 year < 5 yrs 5,454 5,399 5,624 5,649

Other non-current loans with a term > 5 yrs 1,967 934 1,870 1,004

Total 19,187 13,493 19,580 14,376

Bond issues

Issued MaturityCarrying

amount, SEKmFair value,

SEKm

Notes SEK 1,800m 2016 1,800 1,891

Floating Rate Note SEK 200m 2016 200 204

Notes EUR 600m 2016 5,356 5,725

Notes EUR 500m 2023 4,410 4,266

Total 11,766 12,086

49 Other current liabilities

Other current liabilitiesSEKm 2013 2012

Accrued expenses and prepaid income 428 367

Other operating liabilities 5 9

Total 433 376

Accrued expenses and prepaid incomeSEKm 2013 2012

Accrued interest expenses 235 172

Accrued social security costs 26 26

Accrued vacation pay liability 13 12

Other liabilities to personnel 59 59

Other items 95 98

Total 428 367

50 Contingent liabilities

SEKm 2013 2012

Guarantees for:

subsidiaries 20,161 19,950

Other contingent liabilities 14 22

Total 20,175 19,972

The Parent Company has issued a guarantee in relation to the Group’s UK pension plan in the event of the plan being dissolved or one of the companies covered by the plan becom-ing insolvent.

51 Pledged assets

SEKm Other Total 2013 Total 2012

Chattel mortgages 20 20 20

Other 137 137 136

Total 157 157 156

52 Financial instruments by category

The accounting principles for financial instruments are applied for the items below.The financial instruments in the Parent Company are classified as loans and receivables

for assets, and other financial liabilities measured at amortized cost for liabilities. No other categories have been utilized over the past two years. These balance sheet items are not fully reconcilable since they may include items that are not financial instruments.

Loans and receivablesSEKm 2013 2012

Assets in the balance sheet

Financial fixed assets

Interest-bearing receivables 123 124

Interest-bearing receivables from subsidiaries 354 427

Current assets

Receivables from subsidiaries 282 268

Other current receivables 41 40

Cash and bank balances 0 0

Total 800 859

Financial liabilities measured at amortized costSEKm 2013 2012

Liabilities in the balance sheet


Liabilities to subsidiaries 2,180 2,100


Current liabilities

Interest-bearing liabilities 581 –

Liabilities to subsidiaries 61,594 67,083

Trade payables 39 24

Other current liabilities 235 172

Total 83,816 82,871

53 Adoption of the annual accounts

The annual accounts are subject to adoption by SCA’s Annual General Meeting and will be presented for approval at the Annual General Meeting on April 10, 2014.

Note 47 – Provisions for pensions, cont.


Notes – Parent Company | Financial statements

Proposed disposition of earnings

Annual accounts 2013Disposition of earnings, Parent Company

Non-restricted equity in the Parent Company:

retained earnings 36,180,999,307

net profit for the year 5,824,604,319

Total 42,005,603,626

The Board of Directors and the President proposes:

to be distributed to shareholders, a dividend of SEK 4.75 per share 3,336,126,8231)

to be carried forward 38,669,476,803

Total 42,005,603,6261) Based on the number of outstanding shares at December 31, 2013. The amount of the dividend may change if any treasury share transactions

are executed before the record date, April 15, 2014. The company’s equity would have been SEK 56,634,500 lower if assets and liabilities had not been measured at fair value in accordance with Chapter 4, Section 14 of the Swedish Annual Accounts Act.

Stockholm February 25, 2014

The Board of Directors and President declare that the consolidated financial statements have been prepared in accor-dance with the International Financial Reporting Standards adopted by the EU and that disclosures herein give a true and fair view of the Group’s financial position and results of operations. The Parent Company’s financial statements have been prepared in accordance with generally accepted accounting principles in Sweden and give a true and fair view of the Par-ent Company’s financial position and results of operations. The statutory Board of Directors’ Report provides a fair review of the Parent Company’s and Group’s operations, financial position and results of operations and describes material risks and uncertainties facing the Parent Company and the companies included in the Group.

Sverker Martin-LöfChairman of the Board

Pär Boman Roger Boström Rolf Börjesson Leif Johansson Bert Nordberg Board member Board member Board member Board member Board member

Anders Nyrén Louise Julian Svanberg Örjan Svensson Barbara Milian Thoralfsson Thomas Wiklund Board member Board member Board member Board member Board member

Jan JohanssonPresident and CEO

Our audit report was submitted on February 28, 2014

PricewaterhouseCoopers AB

Anders Lundin Anna-Clara af Ekenstam Authorized Public Accountant Authorized Public Accountant Auditor in charge


Financial statements | Proposed disposition of earnings

Auditor’s report

To the annual meeting of the shareholders of Svenska Cellulosa Aktiebolaget SCA (publ), corporate identity number 556012-6293

REPORT ON THE ANNUAL ACCOUNTS AND CONSOLIDATED ACCOUNTSWe have audited the annual accounts and consolidated accounts of Svenska Cellulosa Aktiebolaget SCA (publ) for the year 2013. The annual accounts and consolidated accounts of the company are included in the printed version of this document on pages 22–110.

Responsibilities of the Board of Directors and the Managing Director for the annual accounts and consolidated accounts The Board of Directors and the Managing Director are responsible for the preparation and fair presentation of these annual accounts in accordance with the Annual Accounts Act and of the consolidated accounts in accordance with International Financial Reporting Standards , as adopted by the EU, and the Annual Accounts Act, and for such internal con-trol as the Board of Directors and the Managing Director determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility Our responsibility is to express an opinion on these annual accounts and consolidated accounts based on our audit. We conducted our audit in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. Those stan-dards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the annual accounts and consolidated accounts are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual accounts and consolidated accounts. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the annual accounts and consolidated accounts, whether due to fraud or error. In making those risk assessments, the auditor considers internal control rel-evant to the company’s preparation and fair presentation of the annual accounts and con-solidated accounts in order to design audit procedures that are appropriate in the circum-stances, but not for the purpose of expressing an opinion on the effectiveness of the com-pany’s internal control. An audit also includes evaluating the appropriateness of account-ing policies used and the reasonableness of accounting estimates made by the Board of Directors and the Managing Director, as well as evaluating the overall presentation of the annual accounts and consolidated accounts.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

OpinionsIn our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the parent company as of 31 December 2013 and of its financial performance and its cash flows for the year then ended in accordance with the Annual Accounts Act. The consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the group as of 31 December 2013 and of their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards, as adopted by the EU, and the Annual Accounts Act. A corporate governance statement has been prepared. The statutory administration report and the corporate governance statement are consistent with the other parts of the annual accounts and consolidated accounts.

We therefore recommend that the annual meeting of shareholders adopt the income statement and balance sheet for the parent company and the group.

REPORT ON OTHER LEGAL AND REGULATORY REqUIREMENTS In addition to our audit of the annual accounts and consolidated accounts, we have also audited the proposed appropriations of the company’s profit or loss and the administration of the Board of Directors and the Managing Director of Svenska Cellulosa Aktiebolaget SCA (publ) for the year 2013.

Responsibilities of the Board of Directors and the Managing DirectorThe Board of Directors is responsible for the proposal for appropriations of the company’s profit or loss, and the Board of Directors and the Managing Director are responsible for administration under the Companies Act.

Auditor’s responsibility Our responsibility is to express an opinion with reasonable assurance on the proposed appropriations of the company’s profit or loss and on the administration based on our audit. We conducted the audit in accordance with generally accepted auditing standards in Sweden.

As a basis for our opinion on the Board of Directors’ proposed appropriations of the company’s profit or loss, we examined the Board of Directors’ reasoned statement and a selection of supporting evidence in order to be able to assess whether the proposal is in accordance with the Companies Act.

As a basis for our opinion concerning discharge from liability, in addition to our audit of the annual accounts and consolidated accounts, we examined significant decisions, actions taken and circumstances of the company in order to determine whether any mem-ber of the Board of Directors or the Managing Director is liable to the company. We also examined whether any member of the Board of Directors or the Managing Director has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.

OpinionsWe recommend to the annual meeting of shareholders that the profit be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the Managing Director be discharged from liability for the financial year.



Anders Lundin Anna-Clara af Ekenstam Authorized Public Accountant Authorized Public Accountant Auditor in charge

Independent assurance report relating to Sustainability Report

Pages 10, 11 and 14 of this document contain an extract of the Sustainability Report. A complete Sustainability Report has been prepared by the company, which contains our full assur-ance report. Based on our review, nothing has come to our attention that causes us to believe that the sustainability report has not, in all material respects, been prepared in accordance with the criteria stipulated in the full version of the assurance report.



Anders Lundin Fredrik Ljungdahl Authorised Public Accountant Expert member, Far


Auditor’s report | Financial statements

Multi-year summary1)

SEKM 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004

INCOME STATEMENT

Net sales2) 89,019 85,408 81,337 82,731 109,358 110,449 105,913 101,439 96,385 89,967

Operating profit 8,683 6,012 2,299 7,793 8,190 8,554 10,147 8,505 1,928 7,669

Personal Care 3,201 3,180 2,645 2,922 3,235 2,912 2,960 2,799 2,474 2,429

Tissue 5,595 4,640 3,150 3,041 3,946 2,375 1,724 1,490 1,577 2,026

Packaging – – – – 413 1,493 2,651 2,072 1,775 2,604

Forest Products 1,843 1,363 2,423 2,915 2,503 2,207 2,870 2,475 1,886 1,777

Other operations3) –1,956 –3,171 –5,919 –1,085 –1,907 –433 –58 –331 –5,784 –1,167

Financial income 120 91 129 57 158 246 193 179 156 453

Financial expenses –1,120 –1,355 –1,454 –1,227 –1,802 –2,563 –2,103 –1,851 –1,651 –1,537

Profit before tax 7,683 4,748 974 6,623 6,546 6,237 8,237 6,833 433 6,585

Tax –2,119 –251 –1,267 –1,755 –1,716 –639 –1,076 –1,366 21 –1,393

Profit for the period from disposal group – 503 900 724 – – – – – –

Profit for the year 5,564 5,000 607 5,592 4,830 5,598 7,161 5,467 454 5,192

BALANCE SHEET

Non-current assets (excl. financial receivables) 105,261 95,256 83,428 105,655 111,745 113,866 104,150 95,994 101,840 96,162

Receivables and inventories 29,882 28,539 25,577 31,890 30,605 36,121 33,793 29,907 29,356 25,681

Non-current assets held for sale 32 1,937 3,379 93 105 102 55 2,665 68 –

Financial receivables 3,221 3,614 2,083 3,254 2,062 2,499 3,663 2,970 2,035 682

Non-current financial assets 227 168 292 220 194 642 366 409 237 128

Cash and cash equivalents 3,649 2,017 2,644 1,866 5,148 5,738 3,023 1,599 1,684 3,498

Assets in disposal group held for sale – – 21,601 – – – – – – –

Total assets 142,272 131,531 139,004 142,978 149,859 158,968 145,050 133,544 135,220 126,151

Equity 63,271 59,706 60,752 67,255 67,156 66,450 63,590 58,299 56,343 54,350

Non-controlling interests 3,033 458 539 566 750 802 689 664 767 768

Provisions 12,978 13,968 12,651 13,908 13,351 13,292 14,199 14,240 17,035 16,962

Interest-bearing debt 38,858 34,727 37,834 37,297 44,766 52,886 42,323 38,601 39,036 35,021

Operating and other non-interest bearing liabilities 24,132 22,672 19,627 23,952 23,836 25,538 24,249 21,740 22,039 19,050

Liabilities in disposal group held for sale – – 7,601 – – – – – – –

Total liabilities and equity 142,272 131,531 139,004 142,978 149,859 158,968 145,050 133,544 135,220 126,151

Capital employed 4) 93,763 85,458 83,374 84,664 112,264 105,955 96,368 96,192 95,341 87,208

Net debt, incl. pension liabilities –33,886 –32,927 –36,648 –34,406 –40,430 –47,002 –37,368 –36,399 –39,826 –34,745

CASH FLOW STATEMENT

Operating cash flow 8,489 9,644 7,418 8,725 14,133 7,813 8,127 6,304 7,471 8,837

Cash flow from current operations 5,989 7,271 5,306 6,490 11,490 3,810 4,508 2,772 4,362 5,688

Cash flow before dividend 371 8,218 2,671 5,049 8,483 77 1,473 1,538 1,768 –6,276

Current capital expenditures, net –3,427 –3,161 –3,250 –3,017 –4,037 –5,353 –5,165 –5,672 –4,859 –4,270

Strategic capital expenditures, non-current assets –1,868 –1,863 –1,637 –2,254 –3,031 –3,109 –1,342 –935 –2,086 –2,398

Business combinations –5,466 –14,872 –983 –484 –51 –1,764 –4,545 –323 –428 –9,340

Divestments 1,716 17,682 –15 1,297 75 1,140 2,852 48 1 0

KEY RATIO5)

Equity/assets ratio, % 44 45 44 47 45 42 44 44 42 44

Interest coverage, multiple 8.7 4.8 1.7 6.7 5.0 3.7 5.3 5.1 1.3 7.1

Debt payment capacity, incl. pension liabilities, % 37 37 36 35 31 26 35 29 27 35

Debt/equity ratio, incl. pension liabilities 0.51 0.55 0.60 0.51 0.60 0.70 0.58 0.62 0.70 0.63

Debt/equity ratio, excl. pension liabilities 0.48 0.48 0.52 0.48 0.55 0.66 0.58 0.59 0.62 0.56

Return on capital employed, % 9 7 4 8 7 8 11 9 2 9

Return on capital employed, excl. items affecting comparability, % 11 10 9 9 9 8 10 9 8 10

Return on equity, % 9 8 1 8 7 9 12 9 1 10

Operating margin, % 10 7 3 9 7 8 10 8 2 9

Operating margin, excl. items affecting comparability, % 11 10 10 10 9 8 9 8 8 9

Net margin, % 6 5 0 6 4 5 7 6 0 6

Capital turnover rate, multiple2) 0.95 1.00 0.98 0.98 0.97 1.04 1.10 1.05 1.01 1.03

Operating cash flow per share, SEK 8.53 10:35 7:55 9:24 16:36 5:42 6:42 3:95 6:22 8:12

Earnings per share, SEK 7.90 7:06 0:78 7:90 6:78 7:94 10:16 7:75 0:61 7:37

Dividend per share, SEK6) 4.75 4:50 4:20 4:00 3:70 3:50 4:40 4:00 3:67 3:501) Up to 2009 including packaging operations, which were divested in June 2012.2) Net sales for SCA’s recycling business were reclassified to other income, with retroactive adjustment for 2009.3) 2013, 2012, 2011, 2010, 2009, 2007, 2005 and 2004 include items affecting comparability of SEK –1,251m, SEK –2,634m, SEK –5,439m, SEK –702m, SEK –1,458m, SEK 300m, SEK –5,365m and SEK –770m,

respectively.4) Calculation of average capital employed is based on five measurements.5) Key ratios are defined on page 116.6) Dividend for 2013 relates to the proposed dividend.


SCA Data

Comments to the multi-year summary

Income statementNet sales In 2004, SCA expanded by acquiring compa-nies, which contributed to an increase in sales of 7% up to the end of 2005. In 2006, SCA’s net sales exceeded SEK 100bn for the first time as a result of volume growth. In 2008, sales increased by 4% to slightly more than SEK 110bn. SCA’s European packaging operations were reclassified to Disposal group held for sale with retroactive adjustment from 2010. Sales declined 24% in 2010 mainly due to the reclassi-fication of the European packaging operations, but also to negative exchange rate effects and the divestment of the Asian packaging opera-tions. Net sales in 2011 fell 2% since both Per-sonal Care and Tissue reported lower sales, while sales for Forest Products remained largely unchanged. All business areas were impacted by negative exchange rate effects. A number of strategic acquisitions and divestments were car-ried out in 2012, including the acquisition of Georgia-Pacific’s European tissue operations and the divestment of SCA’s European packag-ing operations. Net sales for 2012 rose 5%. Sales for both Personal Care and Tissue increased sharply, whereas sales for Forest Products declined. In 2013, SCA divested its publication paper mill in Laakirchen, Austria, as well as the areas of Georgia-Pacific’s European tissue operations which the European Commis-sion ordered SCA to divest in conjunction with the acquisition in 2012. Net sales rose 4% and primarily pertained to acquisitions and increased volumes.

Operating profit For the period up to 2006, Personal Care had been under pressure from rising raw material costs and intense competition, although growth was favorable in both established and new mar-kets. The profit level improved in 2007. Operat-ing profit was stable in 2008 and increased 11% in 2009 as a result of an improved product mix, higher prices and lower raw material costs. Profit declined in 2010. Higher volumes and lower costs failed to offset increased costs of raw materials, marketing activities and negative exchange rate effects. Operating profit for 2011 declined 5% excluding exchange rate effects compared with the preceding year. Higher vol-umes, prices and cost savings did not offset higher costs for raw materials. In 2012, operating profit rose 20% compared with the preceding year. The earnings improvement was attributa-ble to higher volumes and prices, an improved product mix, lower raw material costs and cost savings. In 2013, profit increased 1%. Earnings

were impacted positively by higher volumes, cost savings and acquisitions. Investments in increased market activity resulted in higher vol-umes, but impacted earnings, particularly in the area of diapers. Increased raw material costs and negative exchange rate effects had an adverse impact on profit.

The Tissue operations experienced a number of years (2004–2006) of lower prices, higher raw material and energy costs, and negative exchange rate effects. In 2007, this negative trend was reversed and operating profit increased. As of the fourth quarter of 2007, the acquisition of Procter & Gamble’s European tis-sue unit is included in SCA’s Tissue operations, which has had a positive impact on profit. In 2008, the profit level increased mainly as a result of acquisitions and higher prices and volumes, which were offset by higher costs for raw materi-als. In 2009, the profit level increased as a result of higher prices and lower costs for raw materi-als. SCA invested in emerging markets, includ-ing Russia, which also made a positive contribu-tion to the earnings trend. In 2010, profit declined for Tissue compared with the preced-ing year, due to a sharp increase in costs for raw materials. Operating profit for 2011 increased 4% compared with the preceding year. Higher prices, a changed product mix and increased volumes had a positive impact, while higher raw material and distribution costs combined with negative exchange rate effects had an adverse impact on profit. In 2012, operating profit rose 47%. Higher prices, an improved product mix, increased volumes, acquisitions, lower raw material costs and cost savings contributed to the improvement in earnings. Earnings for 2013 increased 21% compared with the preceding year. The improvement in earnings was due to acquisitions, increased volumes and cost sav-ings. Acquisitions accounted for 9% of the improvement in earnings. Higher energy and raw material costs, negative exchange rate effects and slightly lower prices caused earnings to decline.

In 2005, price reductions resulted in lower earnings in Packaging. In 2006, prices improved gradually, first for containerboard, which led to increases in the price of corrugated board, and thus an improvement in profit. Packaging also implemented successive price increases in 2007. SCA sold its North American packaging operations in the first quarter of 2007. Operating profit declined sharply in 2008 due to the finan-cial crisis and the ensuing recession. Production cutbacks in liner operations and lower demand for corrugated board caused a deterioration in profit. The recession continued in 2009 and the

result from Packaging declined 72% compared with 2008. The Asian packaging operations were divested in 2010. In 2012, the European packag-ing operations were divested and reclassified to Disposal group held for sale with retroactive adjustment from 2010.

Forest Products’ earnings gradually improved between 2004 and 2007. The earnings improvement was mainly an effect of higher prices. Deliveries of publication papers and solid-wood products were stable in 2008, but profit declined due to increased energy and raw material costs. In 2009, profit improved, primar-ily for publication papers, an area in which higher prices, lower raw material costs and effi-ciency enhancements made a positive contribu-tion. Profit increased 16% in 2010 due to pro-ductivity improvements and implemented price increases in pulp and solid-wood products. In 2011, profit declined 17% primarily as a result of higher costs for raw materials and negative exchange rate effects. Operating profit in 2012 fell 44%. The lower earnings were largely attrib-utable to lower prices and negative exchange rate effects in all product categories due to the stronger SEK. The Austrian publication paper mill in Laakirchen was divested in 2013. Profit increased 35% compared with the preceding year due to cost savings, lower raw material costs and profit from forest swaps.

Cash flow statement A total of SEK 59bn has been invested in expan-sion during the reported ten-year period, of which SEK 38bn is attributable to company acquisitions. Maintenance investments amounted to SEK 42bn and have remained at a steady level of about 4% in relation to sales.

Key ratios During the reporting period, the Group’s divi-dend rose from SEK 3.50 to the proposed SEK 4.75, corresponding to an average annual increase of approximately 3.1%. The proposed dividend of SEK 4.75 per share corresponds to an increase of 5.6% compared with the preced-ing year.


SCA Data

Description of costs

Raw materials, energy and transport activities

SCA Group

Timber/chips

Energy Transport activities

Pulp Recovered paper

Personal Care

Tissue Forest Products

Energy, 6%

Transport and distribution expenses, 12%

Other costs of goods sold3), 30%

Raw materials and consumables, 36%

Sales and administration expenses2)5), 16%

Total operating expenses1): SEK 79,291m

Energy, 1%


Other costs of goods sold, 18%


Sales and administration expenses, 28%


Energy, 9%

Transport and distribution expenses, 12%Other costs of goods sold, 24%


Sales and administration expenses, 13%


Energy, 5%


Other costs of goods sold, 41%


Sales and administration expenses5), –2%


Of which

Pulp 9%

Recovered paper 4%

Timber/chips 4%

Super absorbents 3%

Non-woven 2%

Other4) 14%

Total raw materials and consumables 36%

Of which

Pulp 9%

Super absorbents 9%

Non-woven 8%

Other 19%


1) Excluding items affecting comparability.2) Sales and administration expenses include costs for marketing (5 percentage points).3) The two largest items in Other costs of goods sold comprise personnel (12 percentage points) and depreciation/amortization (6 percentage points).4) The item Other in Raw materials and consumables includes costs for chemicals, packaging material and plastic material.5) Sales and administration expenses for Forest Products include profit from forest swaps.

Of which

Pulp 14%

Recovered paper 6%

Other 22%


Of which

Timber/chips 19%

Other 17%


Tissue, 10 %


Personal Care, 0 %

Total of 9.9 million cubic meters

of which, 53% from own forest and 47% purchased externally

Tissue, 78 %

Forest Products, 3 %

Personal Care, 19%

Total of 2.3 million tons

of which, 31% from own pulp mills and 69% purchased externally

Tissue, 86%


Total of 2.4 million tons

of which, 5% from own collection and 95% purchased externally

Personal Care, 0 %

Biofuels, 35 %

Fossil fuels, 36 %

Electricity, 29 %

Total of 24.0 TWh

Other means of transport, 28%

By sea, 72 %

Total of 31 billion ton kilometers


SCA Data

Production plants1) (Capacity is stated in thousands of tons, unless otherwise indicated, and per year)

Personal Care

Production plant Country

Annaba Algeria 2)

Buenos Aires Argentina 2)

Springvale Australia 2)

Sao Paolo Brazil

Drummondville Canada

Song Jiang China

Caloto Colombia 2)

Rio Negro Colombia 2)

San Cristobal Dominican Republic 2)

Lasso Ecuador 2)

Cairo Egypt 2)

Amman Jordan 2)

Shah Alam Malaysia

Ecatepec Mexico

Guadalajara Mexico

Gennep Netherlands

Hoogezand Netherlands

Te Rapa New Zealand 2)

Olawa Poland

Veniov Russia

Jeddah Saudi Arabia 2)

Gemerská Hôrka Slovakia

Kliprivier South Africa 2)

Falkenberg Sweden

Mölnlycke Sweden

Kao Hsiung Taiwan

Ksibet el Mediouni Tunisia 2)

Istanbul Turkey

Istanbul Turkey 2)

Bowling Green US

Tissue

Production plant Country Capacity

Boxhill Australia 2) 53

Ortmann Austria 124

Stembert Belgium 75

Santiago Chile 61

Bogotá Colombia 2) 70

Medellin Colombia 2) 39

Lasso Ecuador 2) 24

Nokia Finland 67

Gien France 145

Hondouville France 78

Kunheim France 50

Le Theil France 62

Orleans France 35

Kostheim Germany 152

Mannheim Germany 279

Neuss Germany 105

Witzenhausen Germany 30

Altopascio Italy 25

Collodi Italy 42

Lucca Italy 140

Monterrey Mexico 57

Sahagun Mexico 60

Uruapan Mexico 36

Cuijk Netherlands 51

Suameer Netherlands 3) 8

Kawerau New Zealand 2) 61

Sovetsk Russia 30

Svetogorsk Russia 55

Allo Spain 160

Production plant Country Capacity

La Riba Spain 26

Mediona Spain 45

Valls Spain 120

Lilla Edet Sweden 100

Chesterfield UK 31

Manchester UK 50

Oakenholt UK 68

Prudhoe UK 87

Stubbins UK 105

Barton US 180

Flagstaff US 53

Menasha US 211

South Glens Falls US 75

Forest Products

Production plant CountryUncoated

paperCoated

paper KraftlinerCTMP

pulpKraft pulp

Total pulp and paper

Solid-wood products 1,000 m3

Ortviken Sweden 390 510 900

Östrand Sweden 100 430 530

Munksund Sweden 415 415 400

Obbola Sweden 450 450

Bollsta Sweden 550

Tunadal Sweden 500

Rundvik Sweden 300

Gällö Timber 2) Sweden 320

Total 390 510 865 100 430 2,295 2,070

1) Excluding Vinda.2) Joint venture companies.3) Non-woven production.

Total 3,325


SCA Data

Definitions and key ratios1)

Glossary

Capital definitions

Capital employed The Group’s and business area’s capi-tal employed is calculated as an average of the balance sheet’s total assets, excluding interest-bearing assets and pension assets, less total liabilities, excluding interest-bear-ing liabilities and pension liabilities.

Equity The equity reported in the consolidated balance sheet consists of taxed equity increased by the equity por-tion of the Group’s untaxed reserves and non-controlling interests. (Deferred tax liability in untaxed reserves has been calculated at a 22.0% rate for Swedish companies and at the applicable tax rate for foreign companies in each coun-try outside Sweden).

Net debt The sum of consolidated interest-bearing liabili-ties, including pension liabilities and accrued interest less cash and cash equivalents and interest-bearing current and non-current receivables and capital investment shares.

Equity per share Equity in relation to the total number of registered shares.

Financial measurements

Equity/assets ratio Equity expressed as a percentage of total assets.

Debt/equity ratio Expressed as net debt in relation to equity.

Interest coverage ratio Calculated according to the net method where operating profit is divided by financial items.

Cash earnings Calculated as profit before tax, with a reversal of depreciation and impairment of property, plant and equipment and intangible assets, share of profits of associates, and nonrecurring items, reduced by tax pay-ments.

Debt payment capacity Expressed as cash earnings in relation to average net debt.

Operating surplus Expressed as operating profit before depreciation/impairment of property, plant and equipment and intangible assets and share of profits of associates.

Operating cash flow The sum of operating cash surplus and change in working capital, with deductions for current capital expenditures in property, plant and equipment and restructuring costs.

Cash flow from current operations Operating cash flow less net financial items and tax payments and taking into account other financial cash flow.

Strategic capital expenditure Strategic investments increase the company’s future cash flow through acquisi-tions of companies, capital expenditures to expand facili-ties, or new technologies that boost SCA’s competitiveness.

Current capital expenditure Investments to maintain competitiveness, such as maintenance, rationalization and replacement measures or investments of an environmental nature.

Margins, etc.

Operating surplus margin Operating surplus as a percentage of net sales for the year.

Operating margin Operating profit as a percentage of net sales for the year.

Net margin Profit for the year as a percentage of net sales for the year.

Capital turnover Net sales for the year divided by average capital employed.

Profitability ratios

Return on capital employed Return on capital employed is calculated for the Group as operating profit as a percent-age of average capital employed.

Return on equity Return on equity is calculated for the Group as profit for the year as a percentage of average equity.

Other measurements

Value added per employee Operating profit plus salaries, wages and payroll expenses divided by the average number of employees.

AfH (Away-from-Home) Tissue sold to bulk consumers such as hospitals, restaurants, hotels, offices and industrial premises.

Consumer tissue Includes toilet and kitchen paper, facial tissues and handkerchiefs.

CTMP (Chemical thermo mechanical pulp) A high-yield pulp produced through the mechanical defibration in a refiner of preheated, chemically pre-treated softwood.

FSC® – Forest Stewardship Council An international organization working to ensure responsible forest manage-ment. FSC has developed principles for responsible forestry that can be applied for certifying forest management and that facilitate FSC labeling of wood products from FSC- certified forests.

Kraftliner The surface layer of corrugated board based on fresh wood fiber.

Kraft pulp Pulp from wood fiber that is chemically treated usually by boiling.

Liner The surface layer of corrugated board. Available in various grades, such as kraftliner (based on fresh wood fiber) and testliner (based on recovered fiber).

LWC paper Light Weight Coated paper is a coated paper with a high mechanical pulp content. Used for high-quality magazines and advertising materials with demanding color- printing requirements.

M3fo Forest cubic meter Volume of timber including tops and bark, but excluding branches. Used to describe the for-est portfolio of standing forest. Growth is also specified in forest cubic meters.

M3s or m3sub Solid cubic meter under bark. Specifies the volume of timber excluding bark and tops. Used in felling and the timber trade.

PEFC™ – Programme for the Endorsement of Forest Certification An international forest certification system.

Personal care products Here defined as incontinence products, baby diapers and feminine care products.

Productive forest land Land with a productive capacity that exceeds one cubic meter of forest per hectare annually.

SC paper Supercalendered publication paper with a high-gloss surface and with a high content of mechanical and/or recycled pulp. Mainly used for catalogues, magazines and advertising materials.

Solid-wood products Wood sawn into various sizes used in, for example, furniture manufacturing and the joinery industry or as construction timber.

Super absorbents Collective name of a number of syn-thetic absorbent materials based on polymers. Important material in personal care products such as diapers and pads.

1) Calculations of key ratios are mainly based on guidelines issued by the Swedish Society of Financial Analysts. Averages are calculated based on five metrics.


SCA Data

AddressesSvenSka CelluloSa aktiebolaget SCa (publ)PO Box 200, SE-101 23 Stockholm, Sweden. Visiting address: Klarabergsviadukten 63 Tel +46 8 788 51 00, fax +46 8 788 53 80Corp. Reg. No.: 556012-6293 www.sca.com

Business units

SCa inContinenCe CaRe euRoPeSE-405 03 GOTHENBURGSwedenVisiting address:Bäckstensgatan 5, Mölndal Tel +46 31 746 00 00Fax +46 31 746 19 00

SCa ConSumeR goodS euRoPePostfach 1265DE-85730 ISMANINGGermanyVisiting address: Adalperostrasse 31 Tel +49 89 970 06 0Fax +49 89 970 06 644

SCa afH PRofeSSional HYgiene euRoPePostfach 1265DE-85730 ISMANINGGermanyVisiting address: Adalperostrasse 31 Tel +49 89 970 06 0Fax +49 89 970 06 644

SCa meiaUniversite Mah. Baglarici Cad.No:29 Kat:6 Avcılar34320 ISTANBULTurkeyTel + 90 212 509 38 22Fax + 90 212 676 01 06

SCa ameRiCaS Cira CentreSuite 26002929 Arch StreetPHILADELPHIA, PA 19104USTel +1 610 499 3700 Fax +1 610 499 3402

SCa aSia PaCifiC5th Floor, Building 1 No.3 Fenyang Road Xuhui DistrictSHANGHAI 200031 ChinaTel +86 21 2405 9800

SCa foReSt PRoduCtSSE-851 88 SUNDSVALLSwedenVisiting address: Skepparplatsen 1 Tel +46 60 19 30 00, 19 40 00Fax +46 60 19 34 97

gHC (global HYgiene CategoRY)SE-405 03 GOTHENBURGSwedenVisiting address:Bäckstensgatan 5, MölndalTel +46 31 746 00 00Fax +46 31 746 19 00

gHS (global HYgiene SuPPlY)Postfach 1265DE-85730 ISMANINGGermanyVisiting address: Adalperostrasse 31 Tel +49 89 970 06 0Fax +49 89 970 06 644

gbS (global buSineSS SeRviCeS)Box 200SE-101 23 STOCKHOLMSwedenVisiting address: Klarabergsviadukten 63Tel +46 8 788 51 00Fax +46 8 788 53 80

This Annual Report was produced by SCA in collaboration with Hallvarsson & Halvarsson. Photos: Torbjörn Bergkvist, Juliana Fälldin, Peter Hoelstad, Olof Holdar, Håkan Lindgren, Rick Tomlinson and SCA. Printing: Elanders 2014. Translation: The Bugli Company AB.


SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ)PO Box 200, SE-101 23 Stockholm, Sweden. Visiting address: Klarabergsviadukten 63 Tel +46 8 788 51 00, Fax +46 8 788 53 80Corp. Reg. No.: 556012-6293 www.sca.com

Awards and recognition

SCA was named one of the world’s most ethical companies by the Ethisphere Insti-tute in the US.

SCA is included in the Dow Jones Sustainability Index, one of the world’s most prestigious sustaina-bility indexes.

SCA is included in the Climate Disclosure Leadership Index.

SCA has been listed on the FTSE4Good global sustainability index since 2001.

SCA is on the Fortune Most Admired Com-panies list, ranked third in the Forestry and Paper class.

SCA became a UN Global Com-pact member in 2008.

SCA is a member of the World Business Council for Sustainable Development (WBCSD).

WWF acknowledged SCA as a leading, transpar-ent company for its environmental impact report-ing in WWF’s Environmental Paper Company Index 2013.

Annual report 2013 - SCA · menstruation and puberty and teaching children about the importance of...

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